Utah State Tax Commission
Sales and Use Tax Workshop - Bed & Breakfast Inns
Online instructions effective July 1, 2007
Back to Tax Training Workshops and Online Classes
Table of Contents
- Section 1 – Introduction
- Section 2 - Tax Commission Resources
- Section 3 - General Sales and Use Tax Workshop
- Section 4 - Combined Rate and Sales-Related Taxes
- Section 5 - Taxable Transactions
- Section 6 - Lodging that Includes Meals
- Section 7 - Food and Food Ingredients
- Section 8 - Sales Tax Exemptions
- Section 9 - Coupons, Gifts and Merchandise Cards
Section 1 - Introduction
Welcome to the Utah State Tax Commission's Sales and Use Tax Workshop for Bed & Breakfast Inns.
Due to legislative actions, tax laws may change frequently. Changes to current laws, rules, bulletins, publications, policies and procedures of the Tax Commission will supersede any information found in this workshop. The information contained in this online workshop is not all-inclusive and should not be used as a legal reference.
For general information on sales and use tax, please see the Utah Sales and Use Tax Workshop; Publication 25, Sales and Use Tax General Information; and Utah Code § 59-12, Sales and Use Tax Act.
This online workshop has been customized for Bed & Breakfast businesses. Additional information for this industry can be found in Publication 55, Sales Tax Information for Restaurants and Publication 56, Sales Tax Information for Lodging Providers.
Section 2 - Tax Commission Resources
Online Services
Visit the Utah State Tax Commission website at http://tax.utah.gov.
From the Tax Commission’s sales and use tax web page, users can get information on sales tax rates, rate changes, filing returns online and more.
A variety of online services are available from the Tax Commission. Visit this site to file Utah tax returns, pay Utah tax liabilities, register a business, request a tax license, or access motor vehicle services such as renewing vehicle registrations.
The Tax Commission’s website includes a Research Library. Use the Research Library database to search rules, decisions, rulings and bulletins. There is also access to state legislation affecting taxes, the Utah Code and U.S. Tax Code.
Go the Tax Commission website to learn about free tax workshops.
Sales and use tax forms and publications are available online.
Contact Us
Representatives in the Taxpayer Services Division are available to assist taxpayers from 8:00 a.m. to 5:00 p.m. Mountain Time, on Monday through Friday, excluding state holidays.
Taxpayers can call (801) 297-2200 or 1-800-662-4335 with tax inquiries. For information specific to sales and use tax, taxpayers are encouraged to:
- Call the Tax Commission’s Technical Research Unit at (801) 297-7705 or toll free at 1-800-662-4335 ext. 7705
- Send an email to TaxMaster@utah.gov
Please note that emails are not secure. Do not include account numbers, social security numbers, or request account changes when corresponding through email.
Section 3 - General Sales and Use Tax Workshop
Click here to review the Utah Sales and Use Tax Workshop. The online workshop includes information on sales tax license requirements, collecting and remitting sales and use tax, types of sales and sales-related taxes, record keeping requirements, and two examples on how to file sales tax returns.
Click here for a schedule of Sales and Use Tax Workshops presented by the Tax Commission.
Section 4 - Combined Rate and Sales-Related Taxes
In Utah, the Combined Sales and Use Tax Rate is imposed on all taxable transactions. The Combined Rate includes: State, Local Option, Mass Transit, Rural Hospital, Arts & Zoo, Highway, County Option, Town Option and Resort Communities* taxes. The Combined Sales and Use Tax Rate is reported to the Tax Commission on form TC-62S or TC-62M.
* Resort Communities Tax: Cities or towns with a transient room capacity greater than or equal to 66 percent of the permanent census population can impose a resort communities tax up to 1 percent. Sales of motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes are exempt from resort communities tax but are subject to the remaining portion of sales and use tax.
To date, fifteen communities in Utah have resort community status:
Utah Resort Communities |
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Alta |
Kanab |
Panguitch |
Boulder |
Midway |
Park City |
Brian Head |
Moab |
Park City East |
Garden City |
Monticello |
Springdale |
Green River |
Orderville |
Tropic |
Utah Code also provides for sales-related taxes and fees that state and local governments may elect to impose. Sales-related taxes and fees include: Transient Room Tax, Tourism Short-Term Leasing Tax, Tourism Restaurant Tax, Motor Vehicle Rental Tax, E911 Emergency Telephone Fee, Telecommunications Fees, Municipal Energy Tax, and others.
Not all businesses are required to collect all sales-related taxes. The nature of the business will determine which, if any, sales-related taxes apply. For example, a business that leases vehicles will collect the Combined Rate and the sales-related Motor Vehicle Rental Tax on its taxable transactions.
The Tax Commission collects most sales-related taxes and fees. However, counties and municipalities may choose to directly collect some sales-related taxes.
Tourism Tax
Where adopted, this tax is imposed on the following types of transactions:
- A restaurant tax of up to 1 percent may be imposed on all prepared foods and beverages sold by restaurants. The term “restaurant” is defined as any retail establishment, other than a theater, whose business is the sale of foods and beverages for immediate consumption and includes dinner theaters. For more information, see Utah Code §59-12-602(4) and Tax Bulletin 3-95: Exclusion of "theaters" from the definition of "restaurant" for purposes of the tourism, recreation, cultural, and convention Facilities Tax .
Exception: In counties that have adopted the tourism tax, it does not apply to sales of food from deli areas, pizza takeout counters or salad bars within a grocery store or convenience store whose primary business is the sale of fuel or food not prepared for immediate consumption. These sales are exempt from the tourism tax even if the store has seats or stools for customers. However, if a grocery store or convenience store has a full-service restaurant, the tourism tax is due on sales in that restaurant.
In counties where the restaurant tax was adopted, bed & breakfast inns must collect restaurant tax on sales of alcohol, set-ups, corkage and required gratuities, as well as charges for room service meals and beverages. Related services – such as equipment rentals, use of flowers and decorations, or the sale of ice carving for banquets – while subject to sales tax, are not subject to restaurant tax. For examples of computing the restaurant tax due on mixed drinks for locations with or without restaurant tax, see Alcoholic Beverages in the Utah Sales and Use Tax Workshop.
Report and remit restaurant tax on form TC-62F, Restaurant Tax Return.
For example, assume a bed & breakfast in Brian Head rents a room to a guest for one day. The rental amount is $180, which includes a $30 meal charge. The food ingredients were purchased tax free for resale. When the guest checks-out, the Brian Head B&B charges the following amounts:
B&B
Price
Combined
Rate
Transient
Room Tax
Restaurant Tax
Totals
$150.00 11.78 4.50 $166.28 30.00 2.36 .03 32.39 $198.67
- In addition to the transient room tax discussed below, a county of the first class (counties with a population of 700,000 or more) may impose an additional tax of .5 percent on temporary lodging, which is the rental of rooms in hotels, motels, inns, trailer courts, campgrounds, tourist homes, and similar accommodations for stays of less than 30 consecutive days. This is reported and remitted on form TC-62T.
Transient Room Tax
Utah counties may impose a transient room tax of up to 4.25 percent on the rental of rooms in hotels, motels, inns, trailer courts, campgrounds, tourist homes, and similar accommodations for stays of less than 30 consecutive days. The transient room tax, if imposed, is charged in addition to sales tax and in addition to other applicable taxes adopted in the community. The transient room tax does not apply to charges for meeting rooms.
Some counties have also enacted a tourism tax on lodging, as noted above.
Counties may directly collect the tax or contract with the Tax Commission to collect it. The sales and use tax rate chart identifies counties that directly collect the tax.
Transient room tax is reported on form TC-62T, unless it is collected directly by the county.
Municipality Transient Room Taxes
In addition to the county-imposed transient room tax and the tourism tax on room rentals, municipalities may impose taxes of up to 1.5 percent on rents charged for the same accommodations that are subject to the Transient Room Tax.
Municipalities may directly collect the tax or contract with the Tax Commission to collect it. The sales and use tax rate chart identifies municipalities that directly collect the tax.
Municipality transient room tax is reported on form TC-62T, unless it is collected directly by the municipality.
Click here to view statewide tax rates for the Combined Rate and sales-related taxes and fees. Rates can change on a quarterly basis; retailers are encouraged to regularly check the Tax Commission’s website for sales tax rate information.
Section 5 - Taxable Transactions
The final consumer pays sales and use tax and sales-related taxes. To identify the final consumer and the party responsible to pay sales or use tax, determine who consumes the tangible personal property.
B&B Guest as Final Consumer
The following table, also available in Pub 56, lists common fees associated with lodging accommodations.
Room TaxAdditional Bed Admission to Exercise Facilities Dry Cleaning No Show Pet Fees Prepaid Calling Cards Room Charges Meeting Rooms Safety Deposit Box Rentals Markup of Telephone Charges by Lodging Providers4 Vending Machine Sales Video/Movie Charges
- Charges for a safety deposit box are subject to sales and resort communities taxes if the boxes are tangible personal property. If the boxes are real property the rental is not subject to sales or resort communities taxes. Refer to Pub 42 for definitions.
- Telephone service providers collect the tax for local and instate long distance calls. However, any markup of these calls by lodging providers is subject to sales tax. Long distance interstate calls are not subject to sales tax.
- Charges for in-room movies or pay-for-view videos or games are subject to sales tax regardless of the manner in which the movie or video game is delivered to the guest’s room.
Sales or rentals of tangible personal property are taxable transactions. For example, if a guest rents a bicycle or purchases items in the B&B’s gift shop, the guest will pay sales tax on the transaction; Transient Room Tax and Tourism Restaurant Tax do not apply.
If the B&B participates in a “Get Away Package” that includes room and airfare advertised for one price, the room charge is subject to sales tax. However, the Transient Room Tax is collected only on the room charge if the room charge is separately stated on the invoice.
B&B as Final Consumer
When a bed & breakfast purchases items such as linens, soap, tissues, shampoos, and similar objects for its guests, the transaction is taxable to the bed & breakfast. This is because the bed & breakfast does not sell the items to its guests; rather, it is supplying the items to guests for free.
A merchant offering complimentary items – including food and meals – is the consumer and pays tax on his/her cost (see Section 6 for additional information). The items are subject to sales tax if purchased from an in-state seller. If purchased from an out-of-state seller, use tax is remitted to the Tax Commission. The same tax rate applies whether sales tax or use tax is remitted.
If the B&B trades or barters lodging in return for services or items, the transaction is taxable to the B&B. While sales tax statutes provide an exemption for trades of tangible personal property, a lodging accommodation is real property and any trades involving lodging accommodations do not create an exempt trade.
Section 6 - Lodging That Includes Meals
Sales of lodging accommodations that include meals are taxable transactions. The B&B will either collect sales tax from its guests or pay sales tax on the meals.
Whether the B&B collects or pays sales tax depends on the B&B’s accounting records. The guidance for lodging that includes meals is found in Tax Commission Rule R865-19S-119.
Rule R865-19S-119 applies to a seller that is not a restaurant and provides the customer both food and lodging. If the seller does not separately state an amount for tax applicable to food or meals on the invoice, the seller must:
- Pay sales and use tax on the food at the time the seller purchases the food; and
- Include the food in the base that is subject to transient room tax.
Two hypothetical invoices are included to illustrate this concept.
In the first example, Invoice A, the B&B pays tax on food when purchased and does not separately state the tax on meals.
Invoice Example A |
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Payment by VISA card # xxxxxxx 5961 |
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The B&B’s accounting records must include receipts for food purchases showing sales tax paid by the B&B on its cost of the food. If the B&B does not pay sales tax at the time of purchase, the B&B must accrue tax on form TC-62S or TC-62M, line 4 – Goods purchased tax free and used by you.
The second example, Invoice B, illustrates when a B&B separately states an amount for tax applicable to food (meals) on the guest’s invoice. A B&B using this accounting method may purchase food exempt from sales tax as items for resale and not include the food in the base that is subject to transient room tax.
Invoice Example B |
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Seven day package for 2
Payment by VISA card # xxxxxxx 5961 |
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The B&B is responsible to ensure amounts are accurately recorded in its accounting records. Ledger entries must breakout the cost of the room and all other charges.
The B&B’s supporting documentation must include:
- Purchase receipts showing no tax;
- Amount charges for meals that are reasonable; and
- Amount charged for room.
Section 7 - Food and Food Ingredients
The state sales and use tax rate is 4.65 percent for non-food taxable transactions and applies in all locations within Utah. The state sales tax rate for food and food ingredients is 1.75 percent (total combined sales and use tax rate is 3 percent statewide).
Food and food ingredients means substances sold for ingestion or chewing by humans that are consumed for the substance’s taste or nutritional value. Food and food ingredients do not include alcoholic beverages, tobacco or prepared food.
For additional information, please see Sales Tax Reduction on Food & Food Ingredients.
Section 8 - Sales Tax Exemptions
Utah law provides three types of sales tax exemptions for all taxpayers:
- Entity-based exemption is determined by who purchases or sells the product. An exemption certificate is required.
- Use-based exemption is determined by the purchaser’s use of the product; for example, items purchased for resale. An exemption certificate is required.
- Product-based exemption is determined by the product. Product-based exemptions do not require an exemption certificate.
Exemption Certificate
The most commonly used exemption form is TC-721, Exemption Certificate.
A purchaser must meet the exemption conditions in order to purchase items tax-free. Funds used to purchase the items must be from the purchaser’s business and the exempt items must be used in the normal course of business.
Exemption certificates are accepted by sellers at face value. Sellers keep the certificates to document the exemption for record keeping purposes. The seller is not liable for unlawfully claimed exemptions unless the seller participates in improperly claiming an exemption.
Sellers may keep exemption certificates on file for a customer’s future purchases. However, certain items purchased tax-free require the purchaser to complete an exemption certificate for each qualifying purchase (e.g., manufacturing equipment). A purchaser is required to notify the seller if a certificate on file is cancelled, modified, or limited for the exemptions claimed.
Businesses that purchase items tax-free under exemption provisions and later use a portion of the items for non-exempt purposes must report and remit sales and use tax on the cost of non-exempt items.
Exempt Purchases
A bed & breakfast can purchase items exempt from sales tax if the items are resold to a customer who is the final consumer and as explained in Section 6. For example:
- If the bed & breakfast purchases food that is prepared and sold in its restaurant, the food items can be purchased exempt from sales tax. (Please note that if the prepared food is provided to guests for free and the B&B does not separately account for the prepared food, the B&B must pay use tax on its cost of the food purchased. See Section 6 – Lodging That Includes Meals).
- If the bed & breakfast purchases items that it sells in its gift shop, those items can be purchased exempt from sales tax.
In both examples, the bed & breakfast provides form TC-721, Exemption Certificate to the seller when the B&B makes the exempt purchase.
Exempt Sales
Some B&B customers may be exempt from sales tax. The customer must meet exemption criteria in order to make purchases exempt from sales tax.
When a customer requests a purchase exempt from sales tax, the B&B gives the customer a blank TC-721, Exemption Certificate. The customer completes the form at the time of purchase and the B&B keeps the completed form on file to support the exemption.
If a customer is not able to complete form TC-721, Exemption Certificate at the time of the purchase, the B&B should charge sales tax on the transaction and reimburse tax to the customer upon receipt of a completed exemption certificate.
Some B&B transactions that may be exempt from sales tax are:
- Religious or charitable organizations (also referred to as nonprofit corporations) – A transaction can be exempt from sales tax, regardless of the amount, if the purchase is made pursuant to a contract between the B&B and the customer. Form TC-73, Sales Tax Exemption Contract, is available for the seller’s use. For purchases totaling $1,000 or more, the customer completes form TC-721.
- Monthly Rentals – Stays of 30 days or longer are exempt from sales, transient room, tourism and resort community taxes. To qualify, residency must be maintained continuously under the terms of a written agreement.
- Government Entities – Sales to Utah and federal governmental agencies are exempt from all taxes relating to charges for lodging accommodations when certain criteria are met. In order for lodging to quality as exempt, the purchase must be made with the government entity’s funds. A purchase does not qualify for this exemption if a government agency employee pays for the purchase with personal funds, even if the employee is reimbursed for the purchase by the government agency.
- a properly completed TC-721G or equivalent exemption certificate;
- a check, purchase order, or voucher supplied by the U.S. or Utah government agency; or
- a U.S. government credit card (also called Smart-Pay cards). For detailed information on Federal government credit cards, please refer to FTA bulletin B-07/02, which can be found at www.taxadmin.org/fta/rate/b-0702.pdf.
- Misc. Fees exempt from sales and transient taxes are fax services, late payment fees, no payment charge, room damage charge, returned check charge, lock-out or lost key fees, parking fees and laundry commission (for services performed when a dry cleaner has already taxed the sale).
Government employees traveling on official business are NOT exempt from sales tax unless they present:
U.S. Department of the Interior (DOI) bureaus that centrally bill travel expenses include: Bureau of Indian Affairs, Bureau of Reclamation, U.S. Geological Survey, Minerals Management Service, Office of Special Trust, Office of Surface Mining, Office of the Secretary and National Business Center. If employees of these DOI bureaus incur travel expenses in Utah, the transactions may be exempt from sales tax. To qualify as tax exempt, the employee must use the DOI MasterCard issued by Bank of America with beginning numbers of 5568 16. In addition, the DOI credit card is embossed with the employee’s name, U.S. Department of the Interior, and the DOI tax exempt ID number.
- Complimentary Rooms – Rooms provided to guests on a complimentary basis are not taxable because there is no charge.
Section 9 - Coupons, Gift Cards and Merchandise Cards
Coupons
When a customer presents a “money off” coupon, the dollar amount of the coupon is not included in the taxable base. For example:
Room charge $150 Less coupon amount - 30 Taxable amount $120
Similarly, if the redeemed coupon is for a 10 percent reduction on the $150 room rate:
Room charge $150 Less coupon amount - 15 Taxable amount $135
Gift Cards
A gift card is not taxed at the time of purchase and is not discounted (e.g., pay $100 for $100 off). When redeemed, the gift card is treated just like cash and tax is calculated on the full amount of a purchase. For example:
| Three day package @ $200 per day | ||
| Total sale | $600.00 |
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| 12.25% sales tax | 73.50 |
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| Total due | $673.50 |
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| Less $100 gift card | - 100.00 |
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| Amount on credit card | $573.50 |
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Merchandise Cards
According to Tax Commission Rule R865-19S-62, meal tickets, coupon books or merchandise cards sold by persons engaged in selling taxable commodities or services are taxable. The tax is billed or collected on the selling price when the tickets, books, or cards are sold. If additional charges are made at the subsequent selection and delivery of merchandise or services, sales tax is collected on the additional charge.
The following example illustrates a sale of a merchandise card for a three-day stay at a B&B and the subsequent redemption of the card by a guest who stays for a total of seven days.
Merchandise Card Example A |
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Coupon is sold to a third-party or a
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Merchandise Card Example B |
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Supporting Documentation
The B&B’s supporting documentation for a guest’s use of coupons, gift cards and merchandise cards must include:
- Food purchase receipts – either with or without sales tax;
- Amount charges for meals that are reasonable;
- Amount charged for room; and
- Redeemed coupon, gift card or merchandise card.
