Are guest units rented by a South Carolina retirement community to residents' family and friends subject to accommodations tax?

Plain-English summary

The South Carolina Department of Revenue ruled that a retirement community's guest unit rented nightly, weekly, or monthly to residents' family and friends was taxable transient lodging. It did not matter whether the resident or the visitor paid.

The main duration exception applied only when the same unit was supplied to the same person for at least 90 continuous days. A series of shorter rentals did not qualify merely because the community regularly maintained the unit for guests.

The ruling also noted two other possible exclusions: the owner-occupied small-facility rule for fewer than six sleeping rooms on the same premises, and an exemption for a nonprofit organization that separately qualified under S.C. Code § 12-36-2120(41).

What this means for you

Retirement-community operators

Treat a dedicated guest suite like other transient accommodations when charging visitors or residents for short stays. Track the specific unit, guest, and continuous occupancy period if claiming the 90-day rule.

Nonprofit communities

Nonprofit status alone was not enough. The operator needed to qualify for the specific statutory exemption described in the ruling.

Accountants and property managers

The ruling distinguished tax liability from retail-license timing. Even a person furnishing accommodations for one week or less in a calendar quarter could still owe tax under the annual-remittance rule described.

Common questions

Q: Is a nightly guest-suite rental taxable?
A: Yes. It is a room or sleeping accommodation furnished to a transient for consideration.

Q: Does it matter whether the resident or visitor pays?
A: No. The ruling treated the rental as taxable in either case.

Q: When does the 90-day exception apply?
A: When the same room or unit is supplied to the same individual or business for at least 90 continuous days.

Q: Are nonprofit retirement communities automatically exempt?
A: No. Only an organization qualifying for the specific statutory nonprofit exemption received the treatment described.

Q: What was the owner-occupied small-facility exception?
A: Fewer than six sleeping rooms on the same premises used as the owner or operator's place of abode, subject to the statutory conditions.

Citations and references

• S.C. Code § 12-36-920 (tax on accommodations furnished to transients and the 90-day rule)
• S.C. Code § 12-36-70(1)(b) (retailer and seller include accommodation providers)
• S.C. Code § 12-36-510 (retail-license and limited-rental remittance rules)
• S.C. Code § 12-36-2120(41) (qualifying nonprofit exemption)
• S.C. Regulations 117-307.3 and 117-307.4 (transient accommodations and continuous rentals)
• SC Revenue Procedure 03-6 (nonprofit exemption procedure referenced by the ruling)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR09-7.pdf

Original ruling text

State of South Carolina

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

SC REVENUE RULING #09-7

SUBJECT:

Rentals to Transients at Residential Retirement Communities
(Sales & Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

REFERENCES:

S. C. Code Ann. Section 12-36-920 (2000, Supp. 2008)
SC Regulation 117-307 (Supp. 2008)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2008)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public and to Department personnel. It is an advisory opinion
issued to apply principles of tax law to a set of facts or general
category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court
decision, or another Departmental advisory opinion.

Question:
If a residential retirement community sets aside a unit to rent on a nightly, weekly or
monthly basis to family and friends of homeowners as described in the Facts below, are
such rentals subject to the sales tax on accommodations?
Conclusion:
If a residential retirement community sets aside a unit to rent on a nightly, weekly or
monthly basis to family and friends of homeowners as described in the Facts below, such
rentals are subject to the sales tax on accommodations unless the same unit is provided to
the same person for a period of ninety or more continuous days.
Note: Some residential retirement facilities are operated by nonprofit organizations. If the
nonprofit organization qualifies for the exemption under Code Section 12-36-2120(41),
rentals of accommodations by the nonprofit organization will not be subject to the sales
tax. For a determination as to whether it qualifies for the exemption in Code Section 1236-2120(41), a nonprofit organization may apply for the exemption using a Form ST-387.
Nonprofit organizations that have obtained the exemption certificate are not required to
obtain a retail sales tax license. See SC Revenue Procedure #03-6 for more information
concerning the sales tax exemption under Code Section 12-36-2120(41).

Facts:
As an amenity to their residents, some residential retirement communities in South
Carolina will set aside a unit for short-term rentals. Out-of-town family members and
friends of the residents of the residential retirement community may rent the unit while
visiting. Payment for this unit may be made by the resident on behalf of the visitor or by
the visitor.
The unit is rented on a short-term basis, typically daily or weekly, but in some cases may
be available to rent for a month or more.
Discussion:
Code Section 12-36-920 imposes the sales tax on accommodations and states:
(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. 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) room service;
(2) amenities;
(3) entertainment;
(4) special items in promotional tourist packages;
(5) laundering and dry cleaning services;
(6) in-room movies;
(7) telephone charges;

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(8) rentals of meeting rooms; and
(9) 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.
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 place of abode.”1
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(A) concerns certain facilities that are not subject to the sales
tax on charges for accommodations, and reads in part:
(A) The tax 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. …
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Code Section 12-36-510 requires all retailers to obtain a retail license from the Department.

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* * * *
(B) 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 transient.
(C) Real estate agents, brokers, corporations or listing services leasing or
renting accommodations, whether owned by them or others, to persons for
periods of less than 90 continuous days are retailers liable for the sales tax
on accommodations.
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
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.
   Therefore, if a residential retirement community sets aside a unit to rent on a nightly,
   weekly or monthly basis to family and friends of homeowners, as described in the Facts,
   such rentals are subject to the sales tax on accommodations unless the same unit is
   provided to the same person for a period of ninety or more continuous days.

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Note: Some residential retirement facilities are operated by nonprofit organizations. If the
nonprofit organization qualifies for the exemption under Code Section 12-36-2120(41),
rentals of accommodations by the nonprofit organization will not be subject to the sales
tax. For a determination as to whether it qualifies for the exemption in Code Section 1236-2120(41), a nonprofit organization may apply for the exemption using a Form ST-387.
Nonprofit organizations that have obtained the exemption certificate are not required to
obtain a retail sales tax license. See SC Revenue Procedure #03-6 for more information
concerning the sales tax exemption under Code Section 12-36-2120(41).
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
June 16
, 2009
Columbia, South Carolina

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