When did RR 04-12 treat rentals of a small vacation home, second home, or owner-occupied bed-and-breakfast as taxable accommodations?

Plain-English summary

South Carolina Revenue Ruling #04-12 explained when a home with fewer than six sleeping rooms was subject to sales tax on accommodations.

Short-term rentals were taxable when the property did not function as the owner's place of abode during the rental period. That included a vacation home used by the owner for only one or two weeks a year and a second home occupied by the owner for half the year but rented weekly during the other half.

Two stated situations were not taxable. A six-month rental to the same person qualified for the rule excluding rentals of at least 90 continuous days from transient accommodations. Rooms rented in a small owner-occupied bed-and-breakfast also qualified for the place-of-abode exception because the owner lived there throughout the year while operating it.

The ruling assumed the owner handled the rentals directly and did not use a real-estate agent, broker, or similar intermediary.

What this means for you

Vacation-home and second-home owners

Occasional personal use did not automatically make the property your place of abode. Under the ruling, the home had to serve as the owner's home or fixed residence during the relevant period.

Bed-and-breakfast operators

The stated exception applied where the owner lived in the home while renting the remaining rooms and the premises had fewer than six sleeping rooms.

Long-term renters and tax professionals

The ruling distinguished short transient stays from a specific room or accommodation supplied to the same person for at least 90 continuous days.

Common questions

Q: Was a weekly vacation rental exempt because the owner used the home for family vacations?
A: No. One or two weeks of owner use did not make it the owner's place of abode under the ruling's facts.

Q: What if the same tenant rented the home for six months?
A: The ruling treated that rental as nontaxable because it exceeded 90 continuous days.

Q: Were rooms in an owner-occupied bed-and-breakfast taxable?
A: Not in the stated facts, because the owner lived there throughout the year and the home had fewer than six sleeping rooms.

Q: Did the ruling decide rentals handled by an agent or platform?
A: No. Its fact patterns expressly assumed the owner rented directly without an agent, broker, or similar person.

Citations and references

• S.C. Code Ann. § 12-36-920 — accommodations tax and exceptions
• S.C. Code Ann. § 12-36-70(1)(b) — accommodations retailer definition
• S.C. Code Ann. § 12-36-510(B)(3) — limited licensing exception discussed
• S.C. Regulations 117-307.3 and 117-307.4 — small place-of-abode and 90-day rules
• Anonymous Taxpayer v. South Carolina Department of Revenue, 00-ALJ-17-0569-CC(1) — place-of-abode analysis discussed by the ruling

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR04-12.pdf

Original ruling text

State of South Carolina
Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
Website Address: www.sctax.org

SC REVENUE RULING 04-12

SUBJECT:

Vacation Homes, Second Homes and Places of Abode
(Sales Tax on Accommodations)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-920 (Supp. 2000)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Section 1-23-10(4) (Supp. 2003)
SC Revenue Procedure #03-1

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public
and to Department personnel. It is a written statement issued to apply
principles of tax law to a specific set of facts or a general category of
taxpayers. A Revenue Ruling does not have the force or effect of law,
and is not binding on the public. It is, however, the Department’s
position and is binding on agency personnel until superseded or
modified by a change in statute, regulation, court decision, or advisory
opinion.

Question:
If a person owns a home with less than six sleeping rooms and rents the home or individual
rooms in the home to others, are the rental charges under any of the following circumstances
subject to the sales tax on accommodations under Code Section 12-36-920?

1. The owner uses the home only for one or two weeks a year for family vacations and rents
   it to others during the rest of the year on a weekly basis. The person renting the home
   from the owner may rent it for more than one week, but in no case does any one person
   rent it for more than three consecutive weeks.
2. The owner lives in the home for six months during the winter months and rents it to
   others during the rest of the year on a weekly basis. The person renting the home from the
   owner may rent it for more than one week, but in no case does any one person rent it for
   more than three consecutive weeks.
3. The owner lives in the home for six months during the summer months and rents it to
   another person for the remaining six months during the winter months.

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4. The owner lives in the home throughout the year, but operates the home as a “bed and
breakfast” whereby the remaining rooms are rented to others on a daily or weekly basis
and the owner serves as an innkeeper providing the necessary amenities and services for
each guest. The person renting a room at the home from the owner may rent it for more
than one week, but in no case does any one person rent a room for more than two
consecutive weeks.
In all the above circumstances, the owner rents the home or the individual rooms in the home on
his own and does not employ the services of a real estate agent, broker or some other similar
person to rent the home or the rooms.
Conclusion:
If a person owns a home with less than six sleeping rooms and rents the home to others, the
rental charges under the following circumstances are subject to the sales tax on accommodations
under Code Section 12-36-920:

1. The owner uses the home only for one or two weeks a year for family vacations and rents
   it to others during the rest of the year on a weekly basis. The person renting the home
   from the owner may rent it for more than one week, but in no case does any one person
   rent it for more than three consecutive weeks.
2. The owner lives in the home for six months during the winter months and rents it to
   others during the rest of the year on a weekly basis. The person renting the home from the
   owner may rent it for more than one week, but in no case does any one person rent it for
   more than three consecutive weeks.
   If a person owns a home with less than six sleeping rooms and rents the home to others, the
   rental charges under the following circumstances are not subject to the sales tax on
   accommodations under Code Section 12-36-920:
3. The owner lives in the home for six months during the summer months and rents it to
   another person for the remaining six months during the winter months. The rental is not
   subject to the sales tax on accommodations since the home is rented to the same person
   for ninety or more continuous days.
4. The owner lives in the home throughout the year, but operates the home as a “bed and
   breakfast” whereby the remaining rooms are rented to others on a daily or weekly basis
   and the owner serves as an innkeeper providing the necessary amenities and services for
   each guest. The person renting a room at the home from the owner may rent it for more
   than one week, but in no case does any one person rent a room for more than two
   consecutive weeks. The rentals are not subject to the sales tax on accommodations since
   the home serves as the owner’s “place of abode” during the same times at which the
   remaining rooms are rented to others as part of a “bed and breakfast” facility.
   In all the above circumstances, the owner rents the home or the individual rooms in the home on
   his own and does not employ the services of a real estate agent, broker or some other similar
   person to rent the home or the rooms.
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Discussion:
Code Section 12-36-920 imposes the sale tax on accommodations, and reads:
(A) A sales tax equal to seven percent is imposed on the gross proceeds derived from the
rental or charges for any rooms, campground spaces, lodgings, or sleeping
accommodations furnished to transients by any hotel, inn, tourist court, tourist camp, motel,
campground, residence, or any place in which rooms, lodgings, or sleeping
accommodations are furnished to transients for a consideration. This tax does not apply
where the facilities consist of less than six sleeping rooms, contained on the same premises,
which is used as the individuals place of abode. The gross proceeds derived from the lease
or rental of sleeping accommodations supplied to the same person for a period of ninety
continuous days are not considered proceeds from transients. The tax imposed by this
subsection (A) does not apply to additional guest charges as defined in subsection (B).
(B) A sales tax of five percent is imposed on additional guest charges at any place where
rooms, lodgings, or accommodations are furnished to transients for a consideration, unless
otherwise taxed under this chapter. The term additional guest charges includes, but is not
limited to:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)

room service;
amenities;
entertainment;
special items in promotional tourist packages;
laundering and dry cleaning services;
in-room movies;
telephone charges;
rentals of meeting rooms; and
other guest services.

(C) Real estate agents, brokers, corporations, or listing services required to remit taxes
under this section shall notify the department if rental property, previously listed by them,
is dropped from their listings.
(D) When any business is subject to the sales tax on accommodations and the business has
more than one place of business in the State, the licensee shall report separately in his sales
tax return the total gross proceeds derived from business done within and without the
corporate limits of municipalities. A taxpayer who owns or manages rental units in more
than one county or municipality shall report separately in his sales tax return the total gross
proceeds from business done in each county or municipality.
(E) The taxes imposed by this section are imposed on every person engaged or continuing
within this State in the business of furnishing accommodations to transients for
consideration.

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Code Section 12-36-70(1)(b) defines the terms “retailer” and “seller” to include every person
“furnishing accommodations to transients for a consideration, except an individual furnishing
accommodations of less than six sleeping rooms on the same premises, which is the individuals
[sic] place of abode.”
Code Section 12-36-510 establishes who, as a retailer or seller, must obtain a retail license before
engaging in business. However, subsection (B)(3) of this section states that a retail license is not
required of:
persons furnishing accommodations to transients for one week or less in any calendar
quarter; however, accommodations taxes must be remitted annually, on forms prescribed
by the department, by April 15 of the following year. This item (3) of this subsection does
not apply to rental agencies or persons having more than one rental unit
SC Regulation 117-307.3 concerns certain facilities that are not subject to the sales tax on
charges for accommodations, and states:
The tax also applies to the gross proceeds from the rental or charges for any rooms,
lodgings or accommodations furnished to transients by any hotel, inn, tourists court, motel,
residence, or any place in which rooms, lodgings or accommodations are furnished to
transients for a consideration, except where such facilities consist of less than six sleeping
rooms, contained on the same premises, which is used as the place of abode of the owner or
operator of such facilities. The gross proceeds derived from the lease or rental of
accommodations supplied to the same person for a period of 90 continuous days shall not
be considered proceeds from transients.
SC Regulation 117-307.4 concerns rentals of ninety or more continuous days, and states:
A business, usually an airline, bus company or railroad, will reserve a certain number of
rooms in a hotel for use by its personnel. Usually the hotel is guaranteed a certain minimum
occupancy. The hotel is paid for the number of rooms that are occupied and would not
necessarily furnish the same rooms each time. Such proceeds derived from the rentals of
the accommodations supplied would be subject to the sales tax.
A business rents from a hotel certain specific rooms on a continuing basis. These rooms are
occupied by authorized personnel of the corporation, on a daily basis. The hotel is paid for
the specific number of rooms that are rented, whether they are used or not.
Transactions of this nature would not be subject to the tax if the contract remains in force
for a time in excess of 90 continuous days.
Based on the above, the furnishing of accommodations for a consideration is subject to the sales
tax on accommodations. However, the sales tax on accommodations does not apply if:

1. the same room is provided to the same person (individual or business) for a period of
   ninety or more continuous days; or

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2. the facilities consist of less than six sleeping rooms, contained on the same premises,
which is used as the place of abode of the owner or operator of such facilities.
While the regulation cited above provides guidance with respect to accommodations for ninety
or more continuous days, neither the statute nor the regulations define the term “place of abode.”
It is an accepted practice in South Carolina to resort to the dictionary to determine the literal
meaning of words used in statutes. For cases where this has been done, see Hay v. South
Carolina Tax Commission, 273 SC 269, 255 S.E.2d 837 (1979); Fennell v. South Carolina Tax
Commission, 233 S.C. 43, 103 S.E.2d 424 (1958); Etiwan Fertilizer Co. v. South Carolina Tax
Commission, 217 SC 484, 60 S.E.2d 682 (1950).
The Second College Edition of the American Heritage Dictionary defines the word “abode” to
mean “a dwelling place or home.” Black’s Law Dictionary, Seventh Edition, defines the word
“abode” to mean “a home; a fixed place of residence.”
In addition, it has been the longstanding policy of the Department that in order for the exception
for a “place of abode” to apply, the facility must serve as the owner or operator’s home or
residence, including periods during which one or more of the remaining sleeping rooms at the
facility are rented to others. This is supported in a case decided by the Administrative Law Judge
Division - Anonymous Taxpayer v. South Carolina Department of Revenue, 00-ALJ-17-0569CC(1). In that case, the taxpayers were citizens and residents of Canada who owned a two
bedroom villa in Hilton Head, South Carolina. The court noted in the “Finding of Fact” (Item 3)
that [i]n 1996, the [Taxpayers] began living in their South Carolina home for six months each
year and no longer rented the property during the winter months. [The Taxpayers] have no rental
agent, office, or employees in South Carolina.” The taxpayers rented the villa for the summer
months by advertising on the Internet.
While the taxpayers raised several arguments before the court, they did not raise the argument
that the villa was their “place of abode.” However, the court in its “Conclusions of Law and
Discussion” concluded, as a matter of law, that under Code Section 12-36-920:

2. Taxpayers renting accommodations in South Carolina have a duty to collect and remit
   accommodations tax on proceeds from such rentals pursuant to S.C. Code Ann. § 12-36920 (2000). That statute provides in pertinent part:
   (A) A sales tax equal to seven percent is imposed on the gross proceeds derived from the
   rental or charges for any rooms, campground spaces, lodgings, or sleeping accommodations furnished to transients by any hotel, inn, tourist court, tourist camp, motel, campground, residence, or any place in which rooms, lodgings, or sleeping accommodations are
   furnished to transients for a consideration. This tax does not apply where the facilities
   consist of less than six sleeping rooms, contained on the same premises, which is used as
   the individual's place of abode. The gross proceeds derived from the lease or rental of
   sleeping accommodations supplied to the same person for a period of ninety continuous
   days are not considered proceeds from transients. . . .

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***
(E) The taxes imposed by this section are imposed on every person engaged or continuing
within this State in the business of furnishing accommodations to transients for
consideration.
Pursuant to this statute, a tax of seven percent is due on the rental of lodging in a residence
to transients for periods of less than ninety days, where the residence in question is not the
taxpayer's place of abode. Furthermore, the statute imposes the tax upon the person
engaged in furnishing the accommodations to transients. Since the Hilton Head property is
not the Petitioners' place of abode and since the rentals in question were all for less than
ninety days, the Department argues that the accommodations tax is due on all rentals of the
Petitioners' property during the audit period.
Upon reviewing the various arguments and issues raised by the taxpayers, the court upheld the
imposition of the sales tax on accommodations.
Based on the above, it is the opinion of the Department that if a person owns a home with less
than six sleeping rooms and rents the home to others, the rental charges under the following
circumstances are subject to the sales tax on accommodations under Code Section 12-36-920:

1. The owner uses the home only for one or two weeks a year for family vacations and rents
   it to others during the rest of the year on a weekly basis. The person renting the home
   from the owner may rent it for more than one week, but in no case does any one person
   rent it for more than three consecutive weeks.
2. The owner lives in the home for six months during the winter months and rents it to
   others during the rest of the year on a weekly basis. The person renting the home from the
   owner may rent it for more than one week, but in no case does any one person rent it for
   more than three consecutive weeks.
   If a person owns a home with less than six sleeping rooms and rents the home or individual
   rooms in the home to others, the rental charges under the following circumstances are not subject
   to the sales tax on accommodations under Code Section 12-36-920:
3. The owner lives in the home for six months during the summer months and rents it to
   another person for the remaining six months during the winter months. The rental is not
   subject to the sales tax on accommodations since the home is rented to the same person
   for ninety or more continuous days.
4. The owner lives in the home throughout the year, but operates the home as a “bed and
   breakfast” whereby the remaining rooms are rented to others on a daily or weekly basis
   and the owner serves as an innkeeper providing the necessary amenities and services for
   each guest. The person renting a room at the home from the owner may rent it for more
   than one week, but in no case does any one person rent a room for more than two
   consecutive weeks. The rentals are not subject to the sales tax on accommodations since
   the home serves as the owner’s “place of abode” during the same times at which the
   remaining rooms are rented to others as part of a “bed and breakfast” facility.
   6

Note: For additional information concerning the sales tax on accommodations, the sales tax on
“additional guest charges,” or the application of the sales or use tax to purchases of beds, linens,
supplies and other items by an accommodations facility, see SC Regulation 117-307.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank III
Burnet R. Maybank III, Director

, 2004
May 24
Columbia, South Carolina

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