00-013

Response August 29, 2000

REQUEST LETTER

00‑013

RE :County request re: transient room tax

During a visit to the COUNTY County Commission I was asked questions about the Tax Commission position concerning transient room tax during the Olympics. I indicated that I was not the appropriate person to speak for the Tax Commission on this topic but that I would get someone to respond.

The question came from Commissioner NAME. She states the problem/issue as follows: The COUNTY County Commission relies on transient room tax as an important source of revenue. They understand that the Salt Lake Organizing Committee (Olympics) reportedly will rent blocks of hotel rooms for a 30 day period. As explained to me, the rules indicate that if a person rents a room for 30 days or more it is exempt form the transient room tax. If a person rents for less than 30 days the tax is due.

Commissioner Cain expressed the idea that SLOC was requesting the Tax Commission to authorize them to rent for the 30 day period, exempt them from transient room tax, and then allow them to rotate persons through the rooms as described above. She expressed concern about the loss of important revenue to the county through this process.

I told the commissioners that I could not directly answer this question but could convey this to the appropriate person(s). Could you determine who would respond and see that the response is given. Thanks in advance for your help.

RESPONSE LETTER

August 29, 2000

RE: Application of sales tax, transient room tax, and other taxes on the sale of accommodations either to or by the Salt Lake Olympic Committee (ASLOC@)

Dear Ms. Cain,

You have presented a question to NAME, Division, concerning the taxation of sales of accommodations either to or by SLOC. Ordinarily, sales tax, transient room tax, and other taxes, depending upon the location, are imposed on the amount paid for Atourist home, hotel, motel, or trailer court accommodations and services for less than 30 consecutive days.@ Utah Code Ann. '59-12-103(1)(I). Accordingly, on sales of accommodations of 30 consecutive days or more either to SLOC or by SLOC, no taxes are imposed. We shall address below the tax implications on sales of accommodations of less than 30 consecutive days, first on those sales to SLOC and then on those sales by SLOC.

Sales of Accommodation to SLOC. On sales of accommodations of less than 30 consecutive days to SLOC, sales tax, transient tax, and other applicable taxes are due, unless a specific exemption applies. Utah Code Ann. '59-12-104(8) provides an exemption from taxation on sales made both to and by religious or charitable organizations, which includes SLOC, as follows:

(8) (a) except as provided in Subsection (8)(b), sales made to or by religious or charitable institutions in the conduct of their regular religious or charitable functions and activities, if the requirements of Section 59‑12‑104.1 are fulfilled;

(b) the exemption provided for in Subsection (8)(a) does not apply to the following sales, uses, leases, or rentals relating to the Olympic Winter Games of 2002 made to or by an organization exempt from federal income taxation under Section 501(c)(3), Internal Revenue Code:

. . . .

(iii) sales of accommodations and services as provided in Subsection 59‑12‑103(1)(I), except for accommodations and services:

(A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter Games of 2002;

(B) exclusively used by:

(I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the Olympic Winter Games of 2002; or

(ii) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic Winter Games of 2002; and

8 for which the Salt Lake Organizing Committee for the Olympic Winter Games of 2002 does not receive reimbursement;

Although sales to a Section 503(c)(3) entity such as SLOC would ordinarily qualify for the religious or charitable exemption, the above exception to the exemption clearly provides that sales of accommodations to SLOC are subject to taxation unless all three conditions of Subsection (8)(b)(iii) are met. If these conditions are met, sales of accommodations to SLOC are exempt from taxation. However, if any one of the three conditions of Subsection (8)(b)(iii) is not met on a particular transaction, that sale of accommodations for less than 30 consecutive days to SLOC is subject to taxation, unless another exemption exists.

Another exemption that may be applicable to SLOC=s purchase of accommodations for less than 30 thirty consecutive days is the Aresale@ exemption of Utah Code Ann. '59-12-104(26). This exemption is available if SLOC, subsequent to its purchase of the accommodations, sells the accommodations to another party. For example, assume that SLOC purchases accommodations (rooms) for a period of time of less than 30 consecutive days from a hotel, then enters into contracts to rent these rooms to other parties. Because SLOC would receive compensation for renting these rooms, SLOC is disqualified under Section 59-12-104(8)(b)(iii) from purchasing the rooms tax-free using the religious or charitable exemption. Nevertheless, under these circumstances, SLOC may purchase these rooms from the hotel tax-free using the Section 59-12-104(26) resale exemption by providing the accommodations vendor with a valid exemption certificate. Of course, SLOC would then have to obtain a sales tax license and collect and remit all applicable taxes from the party to which it rented the rooms, as explained below.

Sales of Accommodations by SLOC. Although Section 59-12-104(8)(a) provides that sales by a religious or charitable organizations are ordinarily exempt from taxation, Subsection (8)(b)(iii) disallows the exemption as it relates to accommodations sold by SLOC unless SLOC meets the three specific conditions. The third condition, found in Section (8)(b)(iii)(C), provides that any transaction for accommodations purchased by SLOC is disqualified from the religious or charitable exemption if SLOC is reimbursed for its purchase of the accommodations. Accordingly, if SLOC rents accommodations for compensation, these sales are disqualified from receiving the religious or charitable exemption.

For the reasons stated above, when SLOC receives compensation for renting out accommodations for a period of less than 30 consecutive days, that transaction is subject to taxation, whether or not SLOC originally purchased the accommodation for a period of less than 30 days or for a period of 30 days or more. Under these circumstances, SLOC is required to collect and remit all taxes due on these transactions to the Tax Commission, including sales tax, transient room tax, and any other applicable taxes. Of course, SLOC need not collect taxes on any sale of accommodations to a party which is itself exempt from taxation, if SLOC receives a valid exemption certificate from that party.

Please contact us if you have any other questions.

For the Commission,

Marc B. Johnson

Commissioner