Wash. Admin. Code § 458-20-166

Current through Register Vol. 25-01, January 1, 2025

Section 458-20-166 - Hotels, motels, boarding houses, rooming houses, resorts, hostels, trailer camps, short-term rentals and similar lodging businesses

(1)Introduction. This rule explains the taxation of persons operating hotels, motels, bed and breakfast facilities, and similar businesses that provide lodging and related services to transient tenants.

(a)References to related rules. The department of revenue (department) has adopted other rules that may contain additional relevant information:

(i) WAC 458-20-111 Advances and reimbursements;

(ii) WAC 458-20-118 Sale or rental of real estate, license to use real estate;

(iii) WAC 458-20-159 Consignees, bailees, factors, agents and auctioneers;

(iv) WAC 458-20-165 Laundry, dry cleaning, linen and uniform supply, and self-service and coin-operated laundry services;

(v) WAC 458-20-167 Educational institutions, school districts, student organizations, and private schools;

(vi) WAC 458-20-168 Hospitals, nursing homes, assisted living facilities, adult family homes, and similar health care facilities;

(vii) WAC 458-20-187 Tax responsibility of vending machine owners and operators; and

(viii) WAC 458-20-245 Taxation of competitive telephone service, telecommunications service, and ancillary service.

(b)Examples. This rule includes examples that identify a set of facts and then state a conclusion. The examples are only a general guide. The department will evaluate each case on its particular facts and circumstances.

(2) This rule explains the business and occupation (B&O) tax, retail sales tax, special hotel/motel tax, the convention and trade center tax, the tourism promotion area charge, and the taxation of emergency housing furnished to homeless people.

(a) This rule applies to persons operating hotels, motels, short-term rentals, and the following businesses:

(i) Trailer camps and recreational vehicle parks that rent space to transient tenants for house trailers, campers, recreational vehicles, mobile homes, tents, and similar accommodations.

(ii) Educational institutions that sell overnight lodging to persons other than students. Information regarding educational institutions is provided in WAC 458-20-167.

(iii) Private lodging houses, dormitories, bunkhouses, and similar accommodations operated by or on behalf of a business or school solely for the accommodation of employees of the business or students of the school, which are not held out to the public as a place where sleeping accommodations may be obtained.

(b) This rule does not apply to persons operating the following businesses:

(i) Hospitals, sanitariums, nursing homes, rest homes, and similar institutions. Information regarding operating these establishments is provided in WAC 458-20-168.

(ii) Apartments or condominiums where the rental is for one month or more. Information regarding rentals for one month or more and the distinction between a rental of real estate and the license to use real estate is provided in WAC 458-20-118.

(3)Transient tenant defined. The term "transient tenant" as used in this rule means any guest, resident, or other occupant to whom lodging and other services are furnished under a license to use real property for less than one month, or less than 30 continuous days if the rental period does not begin on the first day of the month. Providing lodging for a continuous period of one month or more to a guest, resident, or other occupant is a rental or lease of real property. It is presumed that when lodging is provided for a continuous period of one month or more, or 30 continuous days or more if the rental period does not begin on the first day of the month, the guest, resident, or other occupant purchasing the lodging is a nontransient upon the 30th day without regard to a specific lodging unit occupied throughout the continuous 30-day period. An occupant who contracts in advance and remains in continuous occupancy for the initial 30 days will be considered a nontransient from the first day of occupancy provided in the contract.

(4)Business and occupation tax (B&O). Where lodging is sold to a nontransient tenant, the transaction is a rental of real estate and not subject to B&O tax. WAC 458-20-118. Sales of lodging and related services to transient tenants are subject to B&O tax, including transactions that may have been identified or characterized as membership fees or dues.

(a)Retailing classification. Gross income derived from the following activities provided to transient tenants is subject to the retailing B&O tax:

(i) Rental of rooms for lodging;

(ii) Rental of radio and television sets;

(iii) Rental of rooms, space, and facilities not for lodging, such as ballrooms, display rooms, meeting rooms, and similar accommodations;

(iv) Automobile parking or storage; and

(v) Sale or rental of tangible personal property at retail. More information regarding retail sales is provided in subsection (5) of this rule discussing retail sales tax.

(b)Service and other activities classification. Commissions, amounts derived from accommodations not available to the public, and certain fees charged for multiple services are taxable under the service and other activities classification of the B&O tax.

(i) Commission income. Commission income received by hotels, motels, and similar businesses from other businesses providing a service to their tenants is subject to the service and other activities B&O tax, such as commission income received from:

(A) Acting as a laundry agent for tenants when someone other than the hotel provides the laundry service. Information regarding these commissions is provided in WAC 458-20-165;

(B) Permitting a satellite antenna to be installed on the premises or for permitting a broadcaster or cable operator to make sales to the transient tenants staying at the hotel or motel;

(C) The rental of videos for use by tenants staying at the hotel or motel when the hotel or motel operator is making the sales as an agent for a seller; and

(D) The operation of a vending machine not owned by the owner or operator of the lodging facility. Information regarding vending machines is provided in WAC 458-20-187.

(ii) Other income. Gross income derived from the following business activities is subject to the service and other activities B&O tax:

(A) The rental of sleeping accommodations by private lodging houses, including dormitories, bunkhouses, and similar accommodations, operated by or on behalf of a business for its employees, which are not held out to the public as a place where sleeping accommodations may be obtained; and

(B) Deposits retained by a lodging business as a penalty charged to a transient tenant for failure to timely cancel a reservation.

(5)Retail sales tax. Persons providing lodging and other services generally must collect and remit retail sales tax on the gross selling price of the lodging and other services. They must pay retail sales or use tax on all items they purchase for use in providing their services.

(a)Lodging. All fees charged for lodging and related services to transient tenants are retail sales. Included are fees charged for vehicle parking and storage and for space and other facilities, including fees charged by a trailer camp for utility services.

(i) A tenant who does not contract in advance to stay at least 30 days is not entitled to a refund of retail sales tax if the rental period later extends beyond 30 days.

Example: A tenant rents the same motel room on a weekly basis and continues to extend occupancy on a weekly basis until the tenant finally exceeds 30 days. Under these facts, the tenant is considered a transient for the first 29 days of occupancy and must pay retail sales tax on the rental fees. The rental fees are exempt from retail sales tax beginning on the 30th day. The tenant is not entitled to a refund of retail sales taxes paid on the rental fees for the first 29 days.

(ii) A business providing transient-tenant lodging must complete the "transient rental income" information section of the combined excise tax return. The four digit location code must be listed along with the gross income received from transient-tenant lodging subject to retail sales tax for each facility located within a participating city or county.

(b)Meals and entertainment. All fees charged for food, beverages, and entertainment activities are retail sales subject to retail sales tax.

(i) Fees charged for related services such as room service, banquet room services, service charges, and gratuities that are agreed to in advance by customers or added to their bills by the service provider are subject to retail sales tax.

(ii) If meals sold under a promotion such as a "two meals for the price of one," the taxable selling price is the actual amount received as payment for the meals.

(iii) Meals provided by a restaurant to its employees without charge are exempt from retailing B&O tax and retail sales tax. RCW 82.04.750 and 82.08.9995. However, if a charge is made, retailing B&O tax and retail sales tax applies.

(iv) Sale of food and other items sold through vending machines are retail sales. Information regarding income from vending machines and the distinction between taxable and nontaxable sales of food products is provided in WAC 458-20-187 and 458-20-244.

(v) When a single price is charged to nontransient tenants for providing both lodging and meals, retail sales tax must be collected on the market price of the meals. If the market price of the meals is unknown, then the tax will be computed based on double the cost of the meals served. The cost includes the price paid for food and drinks served, the cost of preparing and serving meals, and all other incidental costs, including an appropriate portion of overhead expenses.

(vi) Fees charged for providing extended television reception to transient tenants are retail sales.

(c)Laundry services. Fees charged for laundry services provided by a hotel/motel in the hotel/motel name are retail sales. Fees charged to tenants for self-service laundry facilities are not retail sales, but the gross income derived from these fees is subject to service and other activities B&O tax.

(d)Rentals. Renting tangible personal property such as movies and sports equipment is a retail sale.

(e)Purchases of tangible personal property for use in providing lodging and related services. All purchases of tangible personal property for use in providing lodging and related services are retail sales. The fee charged for lodging and related services is for services rendered and not for the resale of any tangible property.

(i) Retail sales tax applies to purchases such as beds, room furnishings, linens, towels, small toiletry items (e.g., soap, shampoo, body wash, and lotion), restaurant equipment, and laundry supply services.

(ii) Sales of prepared meals or other prepared items are subject to retail sales tax. Information regarding the sales of food products is provided in WAC 458-20-244.

(f)Sales to the United States government. Sales made directly to the United States government are not subject to retail sales tax. Sales to employees of the federal government are taxable even if the employee ultimately will be reimbursed for the lodging fee.

(i)Payment by government voucher or check. If the lodging fee is paid by United States government voucher or United States government check payable directly to the hotel or motel, the sale is presumed to be a tax-exempt sale made directly to the federal government.

(ii)Charges to government credit card. United States government contracted credit cards are used to make payment for purchases of goods and services by or for the United States government. Information about the taxability of government credit card purchases is available on the department's website at dor.wa.gov, or by calling the department's telephone information center at 360-705-6705. You may also contact the department's taxpayer services division at:

Department of Revenue

Taxpayer Services Division

P.O. Box 47478

Olympia, WA 98504-7478

(6)Special hotel/motel tax. Some locations in the state impose special hotel/motel taxes. RCW 67.28.180 and 36.100.040(1). If a business is in one of those locations, an additional tax is charged and reported under the special hotel/motel portion of the tax return. The four digit location code, the gross-selling price for providing the lodging, and the tax rate must be completed for each location where the lodging is provided. The special hotel/motel tax under RCW 67.28.180 applies without regard to the number of lodging units, but the tax imposed under RCW 36.100.040(1) applies only if there are 40 or more lodging units. The taxes apply to the fee charged for the rooms used for lodging by transient tenants, including fees charged for use of camping and recreational vehicle sites. The taxes do not apply to any fees charged for telephone services, laundry, incidental charges, or fees charged for use of meeting rooms, banquet rooms, or other special use rooms.

(7)Convention and trade center tax.RCW 36.100.040(4) authorizes a convention and trade center tax for businesses located in King County selling lodging to transient tenants, including short-term rentals. These businesses must charge their customers the convention and trade center tax and report the tax under the "convention and trade center" portion of the combined excise tax return.

(a) Applicability of tax. The convention and trade center tax applies only to the fees charged for the rooms, or camping or recreational vehicle sites, used to provide lodging for transient tenants. Each campsite is considered a single unit.

The tax does not apply to fees charged for telephone services, laundry, incidental charges, or fees charged for the use of meeting rooms, banquet rooms, or other special use rooms.

(b) Exemptions. The following are exempt from the convention and trade center tax:

(i) A business in a town with a population of less than 300 people that has fewer than 60 rooms that are available or being used to provide lodging to transient tenants, regardless of whether the business also rents units to nontransient tenants and the combined number of transient and nontransient lodging units is 60 rooms or more;

(ii) Businesses classified as hostels;

(iii) Any lodging that is concurrently subject to a tax on engaging in the business of being a short-term rental operator imposed by a city in which a convention and trade center is located;

(iv) Any lodging that is operated by a university health care system exclusively for family members of patients; and

(v) Any lodging that is operated as a charity described in (c)(iii)(B) of this subsection, is otherwise exempted in this subsection, or is emergency lodging to homeless people as described in subsection (9) of this rule.

(c) Definitions. The definitions in this subsection apply to the convention and trade center tax:

(i) "Hostel" means a structure or facility where a majority of the rooms for sleeping accommodations are hostel dormitories containing a minimum of four standard beds designed for single-person occupancy within the facility. Hostel accommodations are supervised and must include at least one common area and at least one common kitchen for guest use.

(ii) "Hostel dormitory" means a single room, containing four or more standard beds designed for single-person occupancy, used exclusively as nonprivate communal sleeping quarters, generally for unrelated persons, where such persons independently acquire the right to occupy individual beds, with the operator supervising and determining which bed each person will occupy.

(iii) "Short-term rental" means a lodging use, that is not a hotel or motel, in which a short-term rental operator offers or provides a dwelling unit, or portion thereof, to a guest or guests for a fee for fewer than 30 consecutive nights. The term "short-term rental" does not include:

(A) A dwelling unit, or portion thereof, that the same person uses for 30 or more consecutive nights; and

(B) A dwelling unit, or portion thereof, that is operated by an organization or government entity that is registered as a charitable organization with the secretary of state, state of Washington, and/or is classified by the federal Internal Revenue Service as a public charity or a private foundation, and provides temporary housing to individuals who are being treated for trauma, injury, or disease and/or their family members.

(d) Reporting requirements. The four digit location code, gross-selling price for the lodging, and the tax rate must be completed for each location where the lodging is provided.

(8)Tourism promotion area charge. A legislative authority as defined in RCW 35.101.010 may impose a charge on the activity of providing lodging by a business, that has 40 or more lodging units, located in the tourism promotion area. The charge does not apply to temporary medical housing that is exempt under RCW 82.08.997, or any lodging business, lodging unit, or lodging guest so designated by the legislative authority. RCW 35.101.055. The charge is administered by the department and must be collected by the business providing the lodging from the transient tenant. The charge is not subject to the sales tax rate limitations of RCW 82.14.410. To determine whether your lodging business must collect and remit the charge, refer to the department's website at dor.wa.gov.

(9)Providing emergency lodging to homeless people. The fee charged for providing emergency lodging to homeless people purchased via a shelter voucher program administered by cities, towns, counties, or private organizations that provide emergency food and shelter services is exempt from the retail sales tax. RCW 82.08.0299. The fee is also exempt from the convention and trade center tax and the special hotel/motel tax. The form of payment does not influence the required minimum number of transient rooms available for use as transient-lodging units.

Wash. Admin. Code § 458-20-166

Amended by WSR 15-22-085, Filed 11/3/2015, effective 12/4/2015

Amended by WSR 19-04-002, Filed 1/23/2019, effective 2/23/2019

Amended by WSR 24-24-090, Filed 12/3/2024, effective 1/3/2025

Statutory Authority: RCW 82.32.300 and 82.01.060. 10-22-067, § 458-20-166, filed 10/29/10, effective 11/29/10. Statutory Authority: RCW 82.32.300. 94-05-001, § 458-20-166, filed 2/2/94, effective 3/5/94; 92-05-064, § 458-20-166, filed 2/18/92, effective 3/20/92; 88-20-014 (Order 88-6), § 458-20-166, filed 9/27/88; 83-07-033 (Order ET 83-16), § 458-20-166, filed 3/15/83. Statutory Authority: RCW 82.01.060(2) and 82.32.300. 78-07-045 (Order ET 78-4), § 458-20-166, filed 6/27/78; Order ET 70-3, § 458-20-166 (Rule 166), filed 5/29/70, effective 7/1/70.