When does a business renting an Illinois hotel room block for at least 30 days qualify as a permanent resident?

Plain-English summary

A business could qualify as a permanent resident from the start when its contract unconditionally required it to pay for a specific number of hotel rooms for at least 30 consecutive days. Those room receipts were excluded from Illinois Hotel Operators' Occupation Tax even if some rooms went unused or different employees occupied them during the period.

The rooms did not have to be the same rooms, and the same individual did not have to stay throughout. What mattered was the right to occupy rooms for 30 consecutive days and, for a business block, the unconditional obligation to pay for a specific number of rooms over that period.

If the contract did not create that unconditional 30-day obligation, the hotel had to charge and collect the tax. Once a room rental reached 30 consecutive days, the business had a legal right to seek a refund from the hotel. Tax collected but not refunded had to be remitted to the Department; after making an unconditional refund, the hotel could claim a credit for tax it had paid.

What this means for you

Put the exact room count, continuous 30-day period, and unconditional payment obligation in the written room-block contract. If the commitment is flexible instead, maintain room-by-room records so refunds and the hotel's credit can be handled after a qualifying 30-day stay.

Common questions

Q: Must the same employee stay for all 30 days?
A: No. Different employees of the business could use the rooms during the qualifying period.

Q: Can the hotel treat the block as exempt on day one?
A: Yes, if the business was unconditionally obligated to pay for a specific number of rooms for at least 30 consecutive days. Otherwise the hotel collected tax first and a refund could follow after qualification.

Citations and references

• 35 ILCS 145/1 et seq. (Hotel Operators' Occupation Tax Act)
• 35 ILCS 145.3(f) (tax collected but not refunded)
• 86 Ill. Adm. Code 480.101 and 480.105 (permanent residents)
• 86 Ill. Adm. Code 480.125 (credit after refund)
• 2 Ill. Adm. Code 1200.120 (GILs)

Subject

Hotel Operators’ Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0081.pdf

Original ruling text

ST 10-0081-GIL 09/08/2010 HOTEL OPERATORS’ TAX
Gross receipts from the rentals of rooms to "permanent residents" are not subject to Hotel
Operators' Occupation Tax liability. A "permanent resident" is any person who has occupied or
has the right to occupy any room or rooms in a hotel for at least 30 consecutive days. See 86
Ill. Adm. Code 480.101. (This is a GIL.)

September 8, 2010

Dear Xxxxx:
This letter is in response to your letter dated January 5, 2010, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
Statutory Reference is made to (35 ILCS 145/) Hotel Operators' Occupation Tax Act.
(Attached for your reference)
Facts
The taxpayer is a hotel who has entered into an agreement with an airline to provide
hotel rooms for all crewmembers for a period longer than 30 days. The number of
rooms occupied by the airline varies from night to night depending on the number of
personnel laying over. Typically the airline occupies 14 rooms on a daily basis per night
each month.
The question is:
(a)
When an organization such as an airline enters into a binding written contract for
a block of rooms for 30 days or more, are there specific conditions, requirements or
wording requested in the contract so that the organization qualifies for tax exemption
due to continuous use of rooms?
(b)
May the rooms be sold as tax exempt from the first day? If not, is there any
credit issued after 30 days?

(c)
(d)

Must the occupancy be in the same room for the entire period?
Must the same individual occupy the room for the entire period?

We are requesting a ruling for the above.

DEPARTMENT’S RESPONSE:
The Hotel Operators’ Occupation Tax Act (35 ILCS 145/1 et seq.) imposes a tax upon persons
engaged in the business of renting, leasing or letting rooms in a hotel. The tax is imposed at a rate of
5% of 94% of the gross rental receipts from the renting, leasing or letting of such rooms. An
additional tax is also imposed at a rate of 1% of 94% of such gross rental receipts. The gross
proceeds from rental receipts for rentals to “permanent residents” are excluded from Hotel Operator’s
Occupation Tax liability.
A permanent resident is any person who occupies or has the right to occupy any room or
rooms, regardless of whether it is the same room or rooms, in a hotel for at least 30 consecutive
days. See 86 Ill. Adm. Code 480.101 and 480.105. Regardless of whether the customer contracted
with the hotel operator to stay 30 consecutive days at check-in, if a person qualifies as a permanent
resident (stays at least 30 consecutive days at the hotel), the gross receipts received by the hotel
operator would not be subject to tax for that period.
If a business and a hotel operator enter into an agreement that requires a business to rent a
specific number of rooms for at least 30 consecutive days and the business is unconditionally
obligated to pay for such rooms, whether or not they are occupied during that period, then the
business is a permanent resident for those specific number of rentals, the hotel operator is not
subject to the Hotel Operator's Tax with respect to the rental receipt for those specific number of
rentals, and it does not have to charge and collect the tax. The rooms may be occupied by different
employees of that business during that 30 consecutive day period.
If a business and a hotel operator enter into an agreement that does not unconditionally
obligate the business to pay for a specific number of rooms for at least 30 consecutive days, the hotel
operator is required to charge and collect the tax. If the hotel operator charges the business the hotel
tax for a room (whether or not it is the same room) for a 30 consecutive day period, the business shall
have a legal right to claim a refund of the amount of tax collected for such room from the hotel
operator.
Any taxes collected by the hotel operator that are not refunded to the customer for any reason
must be remitted to the Department. 35 ILCS 145.3(f). Upon an unconditional refund of the tax to the
permanent resident, the hotel operator may file a claim for credit for any hotel tax paid by the
operator. 86 Ill. Adm. Code 480.125.
I hope this information is helpful. You may wish to review some of the letters on the
Department’s website under the heading “Hotel Operators’ Tax”. If you require additional information,
please visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer Information
Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk