Does a bed-and-breakfast booking agency that places guests in private homes and collects the room charges have to register and collect hotel occupancy sales tax?

Plain-English summary

Kathleen B. Dexter / A Reasonable Alternative, Inc., runs a "bed and breakfast" booking service. It contracts with about 50 "hosts" — people who agree to let the agency arrange for guests to use their spare rooms for transient lodging — and places guests seeking accommodations in those homes. Hosts have no obligation to accept a guest at an inconvenient time or to keep rooms available. Guests pay the agency, which keeps 25% and remits 75% to the hosts as commission; hosts also pay a $50 yearly registration fee. The agency asked whether it must collect sales tax on its charges.

The Department held the agency is operating a hotel and must collect the tax.

• The room-occupancy tax. Section § 1105(e) taxes "the rent for every occupancy of a room or rooms in a hotel," with exceptions for permanent residents and rents of $2/day or less.
• "Hotel" is defined broadly. Both § 1101(c)(1) and 20 NYCRR § 527.9(b)(1) define a hotel as a building (or portion) "regularly used and kept open . . . for the lodging of guests," expressly including apartment hotels, motels, boarding houses, clubs, and (in the regulation) bungalow/cottage colonies.
• A casual single host isn't a hotel — but this agency is. An individual who casually rents out a room in his own residence, without more, would not be operating a hotel. But the agency, by entering many host contracts and holding itself out as having lodging available to the public, is in the business of operating what is in effect a hotel made up of the various hosts' premises.
• Result: register and collect. Because the agency receives all the receipts, it must register with the Tax Commission as a vendor and collect the State and applicable local sales tax on those receipts.

What this means for you

Aggregating many rooms into a public lodging business can make you a "hotel." New York's hotel definition is broad and functional. Whoever holds out lodging to the public and collects the room receipts can be treated as operating a hotel — even if the rooms are scattered across many private homes.

Who collects the money matters. The Department pinned the collection duty on the agency because it received all the receipts. If you run the booking and take in the payments, expect to be the one who must register and remit.

A one-off host is treated differently. The ruling drew a line between a casual individual renting a spare room and an organized business marketing many rooms to the public. Scale and holding-out are what tipped this into hotel operation.

Common questions

Q: I run a B&B booking service placing guests in host homes. Do I collect sales tax?
A: Yes, if you hold lodging out to the public through many hosts and collect the receipts — you're treated as operating a hotel and must register as a vendor and collect tax on room rent under § 1105(e).

Q: What makes something a "hotel" here?
A: A place regularly kept open for the lodging of guests. The definition (§ 1101(c)(1); 20 NYCRR § 527.9(b)(1)) is broad and includes boarding houses, clubs, motels, and similar arrangements.

Q: Is a single homeowner renting one room also a hotel?
A: Not necessarily. The Department said a casual individual host, without more, would not be operating a hotel — but an organized agency marketing many rooms to the public is.

Citations and references

Statutes:

• Tax Law § 1105(e) — tax on the rent for every occupancy of a room in a hotel (with permanent-resident and $2/day exceptions)
• Tax Law § 1101(c)(1) — definition of "hotel"

Regulations:

• 20 NYCRR § 527.9(b)(1) — definition of "hotel" (broad; includes boarding houses, clubs, cottage colonies, and the like)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_33s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(33)S
Sales Tax
September 7, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820118A

On January 18, 1982, a Petition for Advisory Opinion was received from Kathleen B.
Dexter/A Reasonable Alternative, Inc., 117 Spring Street, Port Jefferson, New York 11777.
The issue raised is whether or not a "bed and breakfast" booking agency is required to collect
sales tax on its charges.
Petitioner operates a service whereby persons seeking accommodations are placed in the
homes of "hosts" who have contracted with Petitioner for this purpose. "Hosts" are people who enter
into an agreement whereby Petitioner arranges for guests to use their spare rooms for transient
lodging. Hosts are not required to accept a guest at any time that is inconvenient for them, nor are
they under any obligation to have rooms available for specific times or periods. During the past year
a large majority of hosts had five or fewer bookings, for time periods totaling less than three weeks.
Under the terms of the agreements between Petitioner and approximately 50 hosts, all
receipts collected from the guests are submitted to Petitioner, which then remits 75% of such receipts
to the hosts as a commission. In addition, the hosts are required to pay Petitioner a yearly registration
fee of $50.00.
Section 1105(e) of the Tax Law imposes a tax on "the rent for every occupancy of a room
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."
Section 1101(c)(1) of the Tax Law defines the term "hotel" as follows:
"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."
Section 527.9(b)(1) of the Sales and Use Tax Regulations defines the term "hotel" as follows:
"A building or portion of it, which is regularly used and kept open for the lodging of guests.
The term 'hotel' includes but is not limited to an apartment hotel, a motel, bungalow or
cottage colony, boarding house or club, whether or not meals are served"
Petitioner and approximately fifty hosts have entered into agreements under which Petitioner,
on a regular basis, offers rooms to the public for the lodging of guests. While an individual who
rented out a room in his residence to a transient guest on a casual basis would not, in the absence of
any other activity, be considered to be operating a hotel within the meaning of section 1101(c)(1) of
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

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

-2­
TSB-A-82(33)S
Sales Tax
September 7, 1982

the Tax Law, Petitioner, by entering into a number of host contracts, and holding itself out as having
lodging available to the public, is engaged in the business of operating what is in effect a hotel, albeit
comprised of the premises of various hosts. As the Petitioner receives all the receipts, Petitioner is
required to register with the Tax Commission as a vendor and to collect the State and applicable
local sales tax on its receipts.

DATED: August 20, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau