When a resort sells a single bundled vacation package price covering a hotel room, meals, airfare, car rental, ski passes, and other activities, how do sales tax, transient room tax, and the tourism tax apply?

Plain-English summary

A CPA advising a resort/innkeeper asked the Commission how sales tax, transient room tax, and the 1% tourism tax apply to bundled vacation "packages" that combine a hotel room, meals, airfare, car rental, ski passes, horseback riding, golf, and similar items -- worried that stacking every applicable tax onto the full package price (potentially over 11%) would make Utah packages less competitive than out-of-state alternatives.

The Commission's answers:

1. Single package price or daily rate: The various taxes apply only to the value of each item as if it were sold separately -- not to the whole bundled price as one taxable lump. The innkeeper's internal records must reasonably allocate the price among the items. Breaking it down: room charges get sales tax and transient room tax; meals get sales tax and the 1% tourism tax; airfare is not taxable; car rentals get sales tax, plus a 3% tourism tax on vehicle rentals in counties that have adopted it (paid to the rental agency by the innkeeper); ski passes and horseback riding get sales tax only; golf green fees are not taxable. If the locality has adopted the 1% resort communities sales tax, that applies anywhere regular sales tax does.
2. Itemized billing: The answer doesn't change whether the innkeeper shows a single package price or itemizes each charge -- allocation and taxation follow the underlying items either way.
3. Added service fee (e.g., a 15% resort service charge): The fee must be allocated proportionally across the various underlying charges and taxed accordingly if the underlying service is taxable; the 1% tourism tax applies to the portion allocated to food and beverages.
4. Wine and liquor sales: The 1% tourism tax does apply to wine and liquor sales. Both sales tax and the tourism tax are due on a mixed drink, after deducting the sales tax already paid on the liquor itself at the state liquor store (to avoid literally double-taxing the same liquor purchase).

What this means for you

Resorts, hotels, and tour operators selling bundled packages

You can't avoid item-level taxation by quoting one flat package price -- the Commission requires allocating the bundled price across its components and taxing each according to its own rules (room, food, transportation, activities). Keep internal records showing a reasonable allocation, whether or not you itemize the guest's actual bill.

Accountants for hospitality businesses

This ruling is a practical checklist for a common bundled-pricing scenario: airfare and golf green fees are flagged as not taxable, while room (sales + transient room tax), food (sales + 1% tourism tax), car rental (sales + possible 3% local tourism tax), and ski/horseback activities (sales tax) each carry their own combination. Service fees ride along proportionally with the underlying charges.

Businesses selling alcohol as part of a package

Don't assume the state liquor store's sales tax collection covers everything -- the 1% tourism tax still applies separately to liquor/wine sales and mixed drinks, layered on top after crediting the sales tax already paid upstream.

Common questions

Q: If I sell one flat "package price" instead of itemizing, do I avoid per-item taxes?
A: No, per this ruling -- taxes apply to each item's allocated value regardless of whether the bill is itemized or shown as a single price.

Q: Is airfare included in a vacation package taxable?
A: No, per this ruling -- airfare is not taxable.

Q: Are golf green fees taxable as part of a resort package?
A: No, per this ruling.

Q: How is a 15% service fee taxed?
A: Per this ruling, it must be allocated across the underlying charges proportionally and taxed accordingly, with the 1% tourism tax applying to the food-and-beverage portion.

Q: Does the tourism tax apply to liquor sales if sales tax was already paid at the state liquor store?
A: Yes, per this ruling -- the 1% tourism tax is a separate layer that still applies, though the sales tax already paid on the liquor is credited against the mixed-drink tax calculation.

Q: Can another resort rely on this ruling for its own package pricing?
A: Not automatically -- it binds the Commission only for the taxpayer and the specific package components described. This ruling is also from 1991-92, so verify current statute/rule numbering (including local tourism-tax adoption by county/city) before relying on it.

Citations and references

Statutes:

• Utah Code Ann. § 59-12-603 (1% tourism tax referenced for wine/liquor sales)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/91-029.pdf

Original ruling text

January
31, 1992 Response from Tax Commission

December
12, 1991 Letter from XXXXX of XXXXX

XXXXX,
CPA

Re:XXXXX
Vacation Package

Dear
Mr. XXXXX:

This
letter is in response to your recent request for a Tax Commission ruling on
whether sales tax, transient room tax and the 1% tourism tax applies to
vacation packages offered by innkeepers which would include a hotel room,
meals, airfare, auto rental, ski passes, horseback riding, green fees, etc. You have posed specific questions which will
be addressed.

1. If a guest is charged a single package price
   or daily rate for hotel accommodations, food, airfare, auto rental, ski passes,
   horseback riding, green fees, etc. the various taxes apply only to the value of
   the items as if they were sold separately.
   The customer's billing should indicate that tax has been paid where
   appropriate. The internal records of the innkeeper must allocate a reasonable
   amount for each of the events and items sold. Room charges must have sales and
   transient room taxes applied; meals must have sales and tourism taxes applied;
   airfare is not taxable; sales tax and if in a county which has adopted the 3%
   tourism tax on vehicle rentals, the 3% tourism tax should be paid to the rental
   agency by the innkeeper; sales tax only should be applied to ski passes or paid
   by the innkeeper to a separately operated ski resort; sales tax applies to
   horseback riding in the same manner as ski passes; golf green fees are not
   taxable. If these services are provided in a city which has adopted the 1%
   resort communities sales tax, this tax also applies where sales tax does.

2. The answer does not change where the
   innkeeper itemizes the guest's billing for specific charges.

3. If the resort adds a 15% service fee, the
   service fee must be allocated according to the amount of the various charges
   and tax applied if the service is taxable. The 1% tourism tax applies to the
   amount allocated for food and beverages.

4. The 1% tourism tax does apply to wine and
   liquor sales. Both sales tax and
   tourism tax is due on the sale of mixed drinks after deducting sales tax paid
   on the liquor to the state liquor store.

If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of
that hearing would constitute a declaratory judgment and be appealable to the
Utah State Supreme Court. A Notice of
Appeal Rights and a copy of the Utah Taxpayer's Bill of Rights are attached.

For
the Commission,

Joe
B. Pacheco

Commissioner

Utah
State Tax Commission

Attention:
Joe Pacheco

160
East 300 South

Salt
Lake City, UT 84134

RE: State taxes to be collected by XXXXX on vacation
"packages"

Dear
Commissioner Pacheco:

As
a follow-up to our recent conversation, would you please give the Tax
Commission's opinion as to the liability for sales tax, transient room tax, and
1% tourism tax, in each of the following fact situations:

I. A tourist purchases a XXXXX vacation
"package" covering the following recreational features: Hotel room,
meals, airfare, auto rental, ski passes, horseback riding, golf passes, etc.

1. If the guest is charged a single price or a
   daily rate, should the innkeeper collect transient room tax, sales tax and
   tourism tax on the price of the whole package which may include airfares for
   flights from out-of-state, meals, drinks and various recreational
   activities? If so, the guest could pay
   as much as 11.25% tax on the vacation package which would certainly discourage
   the travel agent vendors from recommending the sale of these packages for Utah
   vacations when comparable packages are available in other states with a lower
   total cost due to the Utah taxes.

2. How would your answer change if the billing
   to the guest itemizes the specific charges for room, meals, drinks,
   transportation, and the various recreational activities? Would this avoid the possible overlapping of
   taxes? Would the innkeeper then charge
   the guest transient room tax on the room charge only, and sales tax on those
   items properly subject to sales tax? To what items would the 1% tourism tax
   apply?

3. Would your answer to "2" be the
   same if, for simplicity, instead of an itemized billing to the guest, the bill
   shows the "package" or daily rate and the innkeeper rubber-stamps the
   bill allocating the daily charge to the various services availed of -- so much
   for room, so much for food, etc.?

II. If, in addition to the quoted package price,
the resort adds a 15% service charge (which is retained by the resort and not
passed on to employees) should the resort charge transient room tax on the full
service charge? Would it make a difference if the bill was itemized as in
"I-2" above or allocated by rubber stamp as in "I-3"
above? Does the 1% tourism tax apply to
any or all of the service charge on the "package"?

III. Should the innkeeper charge the guest the 1%
tourism tax (�59-12-603) on wine and liquor sales when it does not charge sales
tax because the sales tax has already been collected directly by the State at
the time of purchase at the liquor store?

The
Tax Commission's response to the above questions can have a serious effect on
Utah's ability to compete for tourist business. Your thoughtful consideration
and prompt response will be greatly appreciated.

Sincerely,

XXXXX,
C.P.A.