Are sales of time-sharing interests in real property — interval ownership, tenancy-in-common, vacation leases and vacation licenses — subject to New York sales tax?

Plain-English summary

Miller, Addison, Steele, Inc. asked whether New York sales tax applies to sales — made in New York — of time-sharing interests in real property, whether the property itself is in-state or out-of-state. It described four types of interest: interval ownership (a fee-simple form built on revolving tenancies for years with a remainder in common), tenancy-in-common time-sharing (co-ownership plus a side agreement on use periods), the vacation lease (a lease for the same recurring period each year), and the vacation license (a right to use a unit for set periods over several years, most commonly used with hotel facilities). The units range from equipped efficiencies and apartments to hotel rooms.

The Department explained where these fall relative to the sales tax:

• The sales tax only reaches enumerated categories. Article 28 taxes specific things — sales of tangible personal property, enumerated services, certain utilities, hotel/motel occupancies, restaurant food, admissions, club dues, and so on.
• Selling the real-property interest isn't taxed. Receipts from the sale of real property — in fee simple or tenancy in common — are not within Article 28.
• Leasing or licensing real property generally isn't taxed either. As a rule, receipts from leasing or licensing real property fall outside Article 28.
• The exception is hotel-room occupancy. Tax is imposed where the leasing or licensing is really the rental of a hotel room in New York. Section 1105(e) taxes "the rent for every occupancy of a room or rooms in a hotel in this state," with exceptions for a permanent resident and for rent no greater than $2 per day. "Hotel" is defined broadly in § 1101(c)(1) to include an apartment hotel, motel, boarding house or club. The mechanics are detailed in 20 NYCRR 527.9.

What this means for you

Buying or selling a time-share interest in real estate is a real-property transaction, not a sales-tax event. Fee-simple interval ownership and tenancy-in-common time-shares are conveyances of real property, which New York's sales tax doesn't reach.

The label on the interest matters less than whether it's really hotel occupancy. A "vacation license" or "vacation lease" is generally outside the sales tax as a real-property arrangement — unless it functions as the rental of a room in a New York hotel (broadly defined), in which case the occupancy is taxable under § 1105(e). Because vacation licenses are commonly tied to hotel facilities, that's where the occupancy tax is most likely to bite.

Know the occupancy-tax exceptions. Even hotel-room occupancy escapes the § 1105(e) tax for a permanent resident or where the rent is not more than $2 per day, and the detailed rules live in 20 NYCRR 527.9.

Common questions

Q: I'm selling fee-simple interval-ownership weeks. Do I charge sales tax?
A: No. A sale of a real-property interest — fee simple or tenancy in common — is outside Article 28, so New York sales tax doesn't apply to the sale.

Q: What about a vacation lease or vacation license?
A: Leasing or licensing real property is generally not subject to sales tax. The exception is when the arrangement is really the rental of a New York hotel room — then it's taxable as hotel occupancy under § 1105(e).

Q: The units include hotel rooms — does that change things?
A: It can. Occupancy of a room in a "hotel" (defined broadly to include apartment hotels, motels, boarding houses and clubs) located in New York is taxable under § 1105(e), subject to the permanent-resident and low-rent exceptions.

Citations and references

Statutes, regulations and authority:

• Tax Law Article 28 — the sales tax reaches only enumerated categories; sales of real property are not among them
• Tax Law § 1105(e) — tax on the rent for every occupancy of a room in a hotel in New York, excepting a permanent resident or rent of $2/day or less
• Tax Law § 1101(c)(1) — defines "hotel" to include an apartment hotel, motel, boarding house or club
• 20 NYCRR 527.9 — application of the hotel-occupancy tax

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(13)S
Sales Tax
August 24, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810309B

On March 9, 1981 a Petition for Advisory Opinion was received from Miller, Addison,
Steele, Inc., 5 East 57th St., New York, New York 10022.
The issue raised is whether sales made within New York State of in-state or out-of-state time­
sharing interests in real property are subject to the New York State sales tax.
Petitioner defines the term "time-share estate" by reference to Section 718.103(19) of
Florida's Condominium Act, as "any interest in a condominium unit under which the exclusive right
of use, possession or occupancy of the unit circulates among the various owners of time-share estates
in such unit in accordance with a fixed time schedule on a periodically recurring basis for a period
of time established by such schedule."
Petitioner describes four types of time-share estates. "Interval ownership" is described as a
fee-simple form of time sharing "based upon a revolving set of tenancies for years (broken down into
weekly or longer periods), coupled with a remainder over to all of the time-shared owners at the
expiration of the useful life of the building, in tenancy in common." "Tenancy in common time­
sharing" involves a tenancy in common on the part of a number of owners "accompanied by a side
agreement among such owners to use the units for particular periods of time each year." The third
type of time-sharing interest described by Petitioner is the "vacation lease," which is a "lease for the
same recurring period of time each year in a time-shared unit." Finally, a "vacation license" is
described as "a right to use a particular unit in a development for given time periods each year over
a number of years."
The units at issue include fully equipped efficiencies, one and two bedroom apartments, and
hotel rooms. Vacation licenses are stated by Petitioner to be most commonly used in connection with
the time-sharing of hotel facilities.
Article 28 of the Tax Law imposes a sales tax applicable to (1) sales of tangible personal
property, (2) sales of enumerated services, (3) the use of tangible personal property and services, (4)
sales of gas, electricity, refrigeration and steam, and telephone and telegraph services, (5)
occupancies of hotel and motel rooms, (6) food and beverages sold by restaurants and caterers, (7)
admission charges to certain place of amusement and to cabarets and similar places, and (8) club
dues.
Receipts from the sale of real property, whether conveyed in fee-simple or tenancy in
common, are not included within the ambit of Article 28. Receipts from the leasing of, or the
licensing to use, real property, are also generally not subject to tax under Article 28 of the Tax Law.
Tax is imposed, however, in the instance where such leasing or licensing constitutes the rental of a
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-81(13)S
Sales Tax
August 24, 1981

hotel room located in New York. With respect to this, Section 1105(e) of the Tax Law, contained
in Article 28, imposes a tax on "The rent for every occupancy of a room TSB-A-81 (13)S Sales Tax
August,24, 1981 or rooms in a hotel in this state, except that the tax shall not be imposed upon (1)
a permanent resident, or (2) where the rent is not more than at the rate of two dollars per day." The
term "hotel" is defined, in Section 1101(c)(1) of the Tax Law, as "A building or portion of it which
is regularly used and kept open as such for the lodging of guests. The term 'hotel' includes an
apartment hotel, a motel, boarding house or club, whether or not meals are served." The application
of these statutory provisions is described in detail in Section 527.9 of the Sales & Use Tax
Regulations. 20 NYCRR 527.9.

DATED: August 6, 1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR