Is the charge for occupancy in a convalescent home, plus separately billed telephone and air conditioning charges, subject to New York sales tax?

Plain-English summary

Bichor Cholim of Williamsburgh, Inc. runs a convalescent home for people recovering from major surgery and childbirth. It charges for each night of occupancy — stays are generally two weeks or less — and adds separate charges for telephone and air conditioning service. It asked whether any of these charges are subject to sales tax.

The Department said no — none of the charges is taxable.

• The hotel occupancy tax and its limit. New York taxes the rent for hotel occupancy of less than 90 days when the charge is more than two dollars a day (Tax Law 1105(e), 1101(c)(5)).
• A registered convalescent home is not a "hotel." By regulation, when a convalescent home is registered with the New York State Department of Social Services or Department of Mental Hygiene and accepts patients who need special care on account of age, illness, or mental or physical condition, and provides that care through nurses, orderlies, or aides, it is deemed not to be a hotel as to those patients (20 NYCRR 527.9(e)(2)). So the occupancy charge falls outside the 1105(e) tax.
• Incidental phone and A/C charges follow the occupancy. Because the telephone and air conditioning service is incidental to the exempt convalescent-home occupancy, those separately billed charges are exempt as part of the occupancy (20 NYCRR 527.9(i)(1)(i)).

What this means for you

A qualifying care facility isn't taxed like a hotel. If your facility is registered with the appropriate state agency and provides genuine special care through nursing staff, the room charge to those patients is outside New York's hotel occupancy tax — even for short stays that would otherwise look like hotel rentals.

Registration and real care are what matter. The exemption turns on two things: the facility being registered with the Department of Social Services or Department of Mental Hygiene, and its actually providing special care to patients who need it. A place that merely rents rooms would not qualify.

Incidental services ride along with the exempt room charge. Add-on charges that are incidental to the exempt occupancy — here, telephone and air conditioning — are exempt too. That does not automatically extend to every possible extra; the point is that these were incidental to the care stay.

Common questions

Q: We run a nursing/convalescent home. Do we charge sales tax on the room?
A: Not on occupancy by patients receiving special care, if you are registered with the Department of Social Services or Department of Mental Hygiene and provide care through nurses, orderlies, or aides. Such a home is deemed not to be a hotel as to those patients.

Q: Our stays are short — under two weeks. Does that make them taxable like a hotel?
A: No. The short length is what triggers the hotel tax for ordinary lodging, but a qualifying convalescent home is deemed not a hotel regardless of stay length.

Q: What about the separate phone and air conditioning charges?
A: Exempt here, because they are incidental to the exempt convalescent-home occupancy (20 NYCRR 527.9(i)(1)(i)).

Citations and references

Tax Law:

• 1105(e) — imposes sales tax on rent for hotel occupancy of less than 90 days
• 1101(c)(5) — defines hotel occupancy

Regulation:

• 20 NYCRR 527.9(e)(2) — a convalescent home registered with the Department of Social Services or Department of Mental Hygiene, providing special care through nurses, orderlies, or aides, is deemed not to be a hotel as to those patients
• 20 NYCRR 527.9(i)(1)(i) — charges incidental to occupancy

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_54s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-85(54)S
Sales Tax
November 8, 1985

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S850617A

On June 17, 1985 a Petition for Advisory Opinion was received from Bichor Cholim of
Williamsburgh, Inc., 4305 Seagate Avenue, Brooklyn, New York 11224.
The issue raised is whether the charge for occupancy in a convalescent home as well as
separately billed charges for telephone and air conditioning service are subject to sales tax.
Petitioner operates a convalescent home for persons recovering from major surgery and child
birth. A charge is made for each night of occupancy and additional charges are made for the use of
telephone and air conditioning service. Occupancies are generally for periods of two weeks or less.
The Tax Law imposes a sales tax on the charge for hotel occupancies which are for terms of
less than ninety days where such charge is more than two dollars per day. Tax Law 1105(e),
1101(c)(5). The Sales and Use Tax Regulations provide that when convalescent homes ". . .
registered with the New York State Department of Social Services or Department of Mental
Hygiene, whether publicly or privately owned and operated, accept as patients persons who require
special care on account of age, illness, mental or physical condition or the like, and provide this
special care either by nurses, orderlies or aides, they are deemed not to be hotels with respect to such
patients." (20 NYCRR 527.9(e)(2)). Accordingly, occupancies of this nature in convalescent homes
are not subject to the tax imposed by section 1105(e) of the Tax Law. Inasmuch as the telephone and
air conditioning service is incidental to the convalescent home occupancy, such charges are exempt
from tax as part of such occupancy. (Cf. 20 NYCRR 527.9(i)(1)(i)).

DATED: September 10, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR