What does Virginia Ruling of the Tax Commissioner P.D. 20-177 conclude about Exemption : Rooms, Lodgings & Accommodations for 90 Continuous Days?

Plain-English summary

A taxpayer asked the Virginia Tax Commissioner two questions about the sales and use tax exemption for hotel rooms occupied for 90 or more continuous days: how exactly to calculate the exemption when a block of rooms is rented on a rolling basis, and whether the exemption still applies when the room charge is sold as part of a package that also includes meals.

On the calculation question, the Commissioner explained that Virginia Code § 58.1-609.5 8 exempts charges for rooms, lodgings, or accommodations furnished to transients for more than 90 continuous days, and that 23 VAC 10-210-730 lets a hotel refund tax already collected once a guest passes the 90-day mark. Following the Department's prior guidance in P.D. 10-251 and P.D. 14-9, each day starts a new 90-day measuring period, and for a block of rooms rented under a continuing contract, the exemption applies only to the least number of rooms rented on any given day within that 90-day window. Using the taxpayer's own example (January 8 through May 31, 2018), the Commissioner walked through the math: the fewest rooms rented on any day during the first 116-day period was 5 (on February 3, 2018), so 5 rooms qualified for the exemption across that period (580 room-nights); the fewest rooms rented during the remaining 28-day period was 6 (first dropping to that level on March 21, 2018), so 6 rooms qualified for that period (168 room-nights) -- 748 exempt room rentals in total.

On the meals question, the answer was no relief: the 90-day exemption is specific to rooms, lodgings, and accommodations and has no counterpart for meals, which remain taxable under 23 VAC 10-210-930 and Va. Code § 58.1-603 4 regardless of how long a guest stays. Critically, the Commissioner reaffirmed the Department's longstanding "bundling" rule (citing P.D. 95-17, P.D. 02-77, P.D. 12-67, and P.D. 13-205): if a hotel charges one lump sum for a package that includes both the (otherwise exempt) room and meals, the entire bundled price is taxable, because "sales price" under Va. Code § 58.1-602 covers the total charge for the transaction. The workaround is separate stated pricing -- if the room charge is stated separately from the meal charge, the room charge can still qualify for the 90-day exemption even though the meal charge remains taxable.

So the ruling is a straightforward, two-part clarification rather than a contested or partially-denied request: the Department answered both of the taxpayer's questions directly, applying existing statutes, regulations, and prior public documents to the specific facts presented.

What this means for you

Hotel, motel, and extended-stay operators

When you rent a block of rooms continuously to a single guest or business (e.g., an airline crew contract), track the daily room count over each rolling 90-day period. The exemption only covers the lowest daily count in that window, not the average or the peak -- so a period where rentals dip to 5 rooms limits your exemption to 5 rooms for that whole span, even if you rented 20 rooms on other days within it.

Hotels selling room-and-meal packages

If you bundle a long-term room rate together with meals (or any other taxable item or service) into a single package price, the whole package becomes taxable -- the room's 90-day exemption does not carry over to shelter the bundle. To preserve the exemption on the room portion, itemize and separately state the room charge from the meal charge on the invoice.

Accountants and tax professionals

When advising extended-stay lodging clients, apply the "least number of rooms" method from P.D. 10-251 and P.D. 14-9 to each new 90-day window, and flag any packaged pricing that combines exempt lodging with taxable meals or other charges -- the fix is separately stated pricing, not a broader exemption.

Common questions

Q: If I rent a block of rooms continuously and the number of rooms used fluctuates, how many rooms qualify for the exemption?
A: Only the smallest number of rooms occupied on any single day during a given 90-continuous-day period qualifies for that period. Each day starts a new 90-day measuring period for this purpose.

Q: Does the 90-day exemption ever apply to meals sold to a long-term guest?
A: No. The exemption in Va. Code § 58.1-609.5 8 covers only rooms, lodgings, and accommodations. Meals sold by hotels, motels, restaurants, and similar establishments remain taxable under 23 VAC 10-210-930 no matter how long the guest stays.

Q: What happens if I sell a long-term room stay bundled with meals for one combined price?
A: The entire bundled charge is taxable. Virginia's "sales price" definition in Va. Code § 58.1-602 covers the total amount charged for a package, so combining an exempt room charge with a taxable meal charge into a single price taxes the whole thing.

Q: How can I still get the room exemption if I also sell meals to the same long-term guest?
A: Separately state the charges. If the room, lodging, or accommodation charge is stated apart from the meal charge, the room charge can still qualify for the 90-continuous-day exemption even though the meal charge stays taxable.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-609.5 8 (exemption for rooms/lodgings furnished to transients 90+ continuous days)
• Va. Code § 58.1-602 (definitions of "retail sale" and "sales price")
• Va. Code § 58.1-603 4 (imposition of tax on meals)
• 23 VAC 10-210-730 (regulation implementing the 90-day exemption and refund procedure)
• 23 VAC 10-210-930 (taxability of meals sold by hotels, motels, restaurants, etc.)

Prior public documents relied on:

• P.D. 10-251 (11/10/2010) -- calculation method for the exemption
• P.D. 14-9 (1/27/2014) -- block rentals of rooms on a continuous basis
• P.D. 95-17 (2/2/1995), P.D. 02-77 (5/2/2002), P.D. 12-67 (5/2/2012), P.D. 13-205 (11/7/2013) -- bundled room/service packages taxed on total charge

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-177

Original ruling text

October 6, 2020

Re: Ruling Request: Retail Sales and Use Tax

Dear *:

This will respond to your letter in which you request a ruling on behalf of * (the “Taxpayer”) concerning the retail sales and use tax exemption for hotel rooms occupied for 90 continuous days or more. I apologize for the delay in responding to your request.

FACTS

The Taxpayer requests a ruling explaining the proper calculation of the retail sales and use tax exemption for hotel rooms that are occupied for 90 continuous days. The Taxpayer also asks whether the exemption is valid when the stay is part of a package that includes the sale of a meal.

RULING

Exemption Calculation

Virginia Code § 58.1-609.5 8 provides an exemption from the retail sales and use tax for:

The sale or charges for any room or rooms, lodgings, or accommodations furnished to transients for more than 90 continuous days by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space or accommodations are regularly furnished to transients for a consideration.

Title 23 of the Virginia Administrative Code (VAC) 10-210-730 interprets this statute. Subsection B of the regulation addresses the 90-day rule for the exemption and states:

The tax does not apply, however, to rooms, lodgings or accommodations supplied to a guest for a period of 90 continuous days or more. After a transient has occupied a room or received other accommodations for 90 continuous days or more, the dealer furnishing the room or other accommodations may refund any sales tax actually collected from the person. In filing a subsequent return with the Department of Taxation, the dealer may deduct from gross sales in the place provided the amount of the charges for which the tax was refunded.

Public Document (P.D.) 10-251 (11/10/2010) addresses the proper calculation of the number of room rentals that qualify for the exemption in Virginia Code § 58.1-609.5 8. Each day is the start of a new 90-day period for purposes of calculating the least number of rooms rented during the period. P.D. 14-9 (1/27/2014) addresses the Department’s policy with respect to block rentals of hotel rooms on a continuous basis to businesses such as airlines. When a block of rooms is rented under rental contracts, the exemption applies to the least number of rooms rented on a given day during a continuous 90-day period.

The Taxpayer provides an example, listing dates from January 8, 2018 through May 31, 2018, along with a number of rooms rented, and asks the Department to explain the exemption calculation. In the Taxpayer’s example, the least number of rooms rented on any day is 5 rooms on February 3, 2018. Therefore, the guest in the example would be entitled to the exemption for 5 rooms for the 116 day period, from January 8, 2018 through May 3, 2018, or 580 room rentals. The next fewest number of rooms rented is 6 rooms on March 21, 2018. The guest would be entitled to the exemption for 6 rooms for the remaining 28 day period, from May 4, 2018 through May 31, 2018, or 168 room rentals. In total, the guest in the Taxpayer’s example is entitled to the exemption for 748 room rentals.

Accommodations and Meals Packages

Virginia Code § 58.1-602 includes in the definition of retail sale “… any room or rooms, lodgings, or accommodations furnished to transients for less than 90 continuous days by any hotel, motel, inn, camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for consideration.” Similarly, as already discussed above, Virginia Code § 58.1-609.5 8 provides an exemption from the retail sales and use tax for accommodations supplied for a period of 90 continuous days or more. Therefore, once a room sale meets the 90-day threshold, it no longer falls under the definition of a retail sale and is not subject to the tax imposed by Virginia Code § 58.1-603 4. However, there is no such exemption or exception for the sale of meals.

Title 23 VAC 10-210-930 provides that “retail sales of meals by restaurants, hotels, motels, clubs, caterers, cafes and others are taxable.” Virginia Code § 58.1-602 defines “sales price” to mean the “total amount for which tangible personal property or services are sold…” The Department has previously ruled that packages offered by hotels, motels, inns, etc. that include a single charge for accommodations and other services or tangible personal property are subject to the tax on the total charge for the package. See P.D. 95-17 (2/2/1995), P.D. 02-77 (5/2/2002), P.D. 12-67 (5/2/2012), and P.D. 13-205 (11/7/2013). This is also similar to the tax treatment of packages offered in other industries where only part of a transaction is taxable. See P.D. 08-76 (6/6/2008), P.D. 08-90 (6/18/2008), P.D. 14-1 (1/3/2014), P.D. 14-41 (3/20/2014), and P.D. 19-41 (4/25/2019). As such, a tax exempt sale of rooms, lodgings, or accommodations that is “packaged” or lumped into a single charge with the taxable sale of meals is subject to tax on the total charge of the package. However, if the charges are separately stated, any charge for rooms, lodgings, or accommodations that meets or exceeds the 90-day threshold is not taxable.

I hope the above information responds to your inquiry. This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections, regulations and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's website. If you have any questions about this ruling, please contact * in the Department’s Office of Tax Policy, Appeals and Rulings Division, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1818.C

Related Documents

10-251

14-9

95-17

02-77

12-67

13-205

08-76

08-90

19-41