Does Utah's transient room tax apply to the rental fees a 'condo hotel' charges unit owners for nights beyond their free annual usage allotment?

Plain-English summary

A developer proposed building a commercial "condo hotel" where buyers purchase an equity ownership interest in a unit that entitles them to use it free for 28 days each year. Any use beyond those 28 days — by the owner or anyone else — triggers a rental fee charged and collected by the condo hotel operator. The city asked the Commission to confirm whether transient room tax applies to those rental fees.

The Commission confirmed it does, when the stay is short enough. Utah has two separate transient room taxes layered on top of ordinary sales tax for short-term lodging: a county transient room tax under § 59-12-301 (here, the county had elected to impose it) and a municipality transient room tax under § 59-12-352 (the city had also elected to impose it, capped at 1% of rents charged). Both apply, per Rule R865-19S-96(B), whenever the rental period for a "motor court, motel, hotel, inn, tourist home, campground, mobile home park, recreational vehicle park or similar business" is less than 30 consecutive days.

Applying that to the condo hotel: any rental fee charged for occupancy beyond an owner's 28 free days — since it's necessarily a stay of under 30 consecutive days — is subject to both the county and the municipality transient room tax. Only if a particular rental ran 30 consecutive days or longer would neither transient room tax (nor sales tax) apply to that stay.

What this means for you

Resort and condo-hotel developers

Structuring a project as equity-ownership units doesn't take rental income for extra-day usage outside the transient room tax system. If your rental periods are typically under 30 days — which is the norm for hotel-style condo usage — expect both a county and (where the city has elected to impose one) a municipal transient room tax to apply on top of sales tax.

Hotel and short-term lodging operators generally

The bright-line trigger across all these Utah lodging taxes is the 30-consecutive-day threshold. Utah deliberately applies sales tax and both transient room taxes uniformly to any stay under 30 days, even though the underlying statutes for sales tax and the two room taxes don't use identical language — the Commission has chosen to administer them consistently at that threshold.

Accountants and tax professionals

Note the layered-tax structure here: ordinary sales tax, county transient room tax (§ 59-12-301), and municipality transient room tax (§ 59-12-352, capped at 1% of rents by statute) can all apply simultaneously to the same short-term rental transaction. Confirm which taxing jurisdictions (county and/or specific municipality) have actually elected to impose their respective room tax before assuming all three apply.

Common questions

Q: Is a stay of 30 days or more subject to Utah's transient room tax?
A: No — stays of 30 consecutive days or longer are outside sales tax, county transient room tax, and municipality transient room tax alike.

Q: Does condo/equity ownership of a hotel unit avoid the transient room tax on extra rental days?
A: No. Rental fees for occupancy beyond an owner's free-use allotment are treated the same as any other short-term hotel rental for tax purposes.

Q: Can both a county and a city transient room tax apply to the same rental?
A: Yes, if both the county and the municipality have separately elected to impose their own transient room tax.

Q: Can another condo-hotel developer rely on this ruling?
A: No — it binds the Commission only for the facts presented by this taxpayer. Confirm your own project's structure and the relevant county/city elections.

Citations and references

Statutes:

• Utah Code Ann. § 59-12-301(1)(a) (county transient room tax)
• Utah Code Ann. § 59-12-352(1)(a) (municipality transient room tax, capped at 1% of rents)

Rules:

• Utah Admin. Rule R865-19S-96(B) (transient room tax applies to rental periods under 30 consecutive days)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/00-022.htm

Original ruling text

00-022

Response August 23, 2000

REQUEST LETTER

Dear Kerry,

RESORT
Resort has proposed the construction of a #### unit commercial condo hotel in
CITY. Their proposal will allow owners
of a unit to utilize the unit for 28
days a year, after 28 days they would be subject to a rental fee.

We
request a determination by the Utah State Tax Commission as to whether the
rents received from these units for the balance of the year will be subject to
the transient room tax. The developer
of the project supports the collection of a transient room tax.

If
you have any questions with regards to his request, please call the City office
at #####.

RESPONSE
LETTER

August
23, 2000

RE: Applying Transient Room Tax to Rental Fees Charged by "Condo Hotels"

Dear NAME,

You
have requested a determination from the Tax Commission concerning a particular
company's proposal to build and operate a "condo hotel" in
CITY City. You specifically ask if the
rents paid to purchase accommodations in the condo hotel would be subject to
Utah's "transient room
tax." The purchase
of accommodations in CITY City, besides being subject to sales tax, is subject
to two separate transient room taxes, the transient room tax imposed under Utah
Code Ann. §59-12-301 and the municipality transient room tax
imposed under Utah Code Ann. §59-12-352.

Section
59-12-301(1)(a) provides that a county may elect to impose a transient room
tax on "the rent for every occupancy of a suite, room, or
rooms on all persons, companies, corporations, or other similar persons, groups,
or organizations doing business as motor courts, motels, hotels, inns, or
similar public accommodations." COUNTY County has elected to impose the
transient room tax on all such rents occurring in its county, which includes
those that occur in CITY City. Utah
Admin. Rule R865-19S-96(B) provides that "[t]he
transient room tax shall be charged on the rental price of any motor court,
motel, hotel, inn, tourist home, campground, mobile home park, recreational vehicle
park or similar business where the rental period is less than 30 consecutive
days."

Section
59-12-352(1)(a) provides that "[t]he governing
body of a municipality may impose a transient room tax on the rents charged to
transients occupying public accommodations in an amount that is less than or
equal to 1% of the rents charged."[1] CITY has
elected to impose the municipality transient room tax on all purchases of
accommodations occurring within city boundaries.

From
your description of the condo hotel's
proposed operations, we assume that the condo hotel will sell an equity
ownership in each of its units that allows the "unit owner" to use that unit 28 days a year. Any other occupation of that unit would be
subject to a rental fee charged and collected by the condo hotel. This rental fee would also be charged to any
"unit owner"
after that owner has utilized the 28 days of occupancy associated with his or
her equity ownership. If the rental
period is less than 30 consecutive days, such rental fees are of the type
subject to the transient room tax under Section 59-12-301 and Rule R865-19S-96
and the municipality transient room tax under Section 59-12-352. Of course, should the rental period be for
30 consecutive days or more, such rental fees are not subject to taxation. Under this circumstance, neither the sales
tax, the transient room tax, nor the municipality transient room tax would be
charged on the rental fee.

If
you have any other questions or if we can assist you in another matter, please
contact us.

For
the Commission,

Marc
B. Johnson

Commissioner

[1] The
municipality transient room tax is statutorily imposed on the purchase of
accommodations for 30 consecutive days or less. The sales tax and transient room tax are statutorily imposed on
the purchase of accommodations for less than 30 consecutive days. To administer these conflicting time periods
in a consistent manner, the Tax Commission has chosen to apply all taxes to
those purchases of accommodations for less than 30 consecutive days.