Did listing a room through a screened, members-only home-sharing website avoid Illinois Hotel Operators' Occupation Tax?

Plain-English summary

An attorney asked whether individuals occasionally renting rooms in their homes through private, members-only websites were subject to Illinois Hotel Operators' Occupation Tax (HOOT), and whether IDOR would waive enforcement while resolving perceived collection inequities.

IDOR did not give a blanket answer. It said taxability depended on the specific facts of each transaction.

The general dividing line was whether the rooms were available to the public:

• Rooms intended to be truly exclusive—such as rooms rented only to members of a private club and not to the general public—were not considered open to the public and were not subject to HOOT.
• A person who welcomed and encouraged “other individuals and organizations” to use the rooms could be operating facilities open to the public even if prospective users were screened.

The letter defined taxable rent broadly as all consideration received for occupancy. HOOT was imposed on the operator, not directly on the occupant. An operator could collect a reimbursement charge labeled “hotel tax,” but still owed HOOT on rental receipts even if the occupant did not reimburse it.

Common questions

Did membership registration alone make the rental private? No. Screening did not by itself prevent the facilities from being open to the public.

Were true private-club rooms taxable? IDOR said rooms limited to private-club members and not offered to the public were outside HOOT.

Did IDOR decide every home-sharing listing? No. It said the result required specific facts.

Citations and references

• 35 ILCS 145/2(1), (3), (6) and 145/3(a)
• 86 Ill. Adm. Code 480.101

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2012/st-12-0060.pdf

Original ruling text

ST 12-0060-GIL 11/30/2012 HOTEL OPERATORS’ TAX
The Hotel Operators' Occupation Tax Act is imposed upon hotel operators engaged in
the business of renting, leasing or letting rooms in a hotel. See 86 Ill. Adm. Code
480.101. (This is a GIL.)
November 30, 2012
Dear:
This letter is in response to your letter dated October 11, 2012, 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:
I write with an inquiry as to the applicability of hotel and other related state, municipal
and quasi-municipal (i.e., MPEA) taxes for hotel operators upon private individuals, who
through a private, members-only internet website, who list rooms in their private
residential apartments, condominiums or homes, to other individuals who are also
members of the same website, for a per diem fee.
A new generation of internet-based platforms has emerged – including XX.net and
XXX.com – whereby a selective, members-only community of “hosts” can register and
list their residences (or rooms within a larger private residence) exclusively to other
members of the same website (“guests”), pursuant to terms and conditions of
membership and the payment of certain membership fees. The benefit of such
selective, private platforms is that there is a degree of monitoring and screening over
both “hosts” and “guests” that is intrinsic to the registration process, such that not all
listings are available to the general public but are instead, only available to those who
register and qualify and are not otherwise excluded.
A question arises, however, as to the applicability of various state and local taxes that
are ordinarily assessed against hotel operators in the business of marketing short-term
accommodations to the general public. Specifically, the Illinois Hotel Operators’
Occupation Tax Act, 35 ILCS 145/1 et seq., applies to “persons engaged in the
business of renting, leasing or letting rooms in a hotel…” 35 ILCS 145/3(a). The act
defines both the terms “hotel” and “room” separately: a “hotel” is a “building or buildings
in which the public may, for a consideration, obtain living quarters, sleeping or
housekeeping accommodations. The term includes inns, motels, tourist homes, or
courts, lodging houses, rooming houses and apartment houses.” 35 ILCS 145/2(1). A
“room,” by contrast, is defined as “any living quarters, sleeping or housekeeping

ST 12-0060-GIL
November 30, 2012
Page 2
accommodations.” 35 ILCS 145/2(4). The tax itself is imposed upon those who rent or
lease rooms “in a hotel,” which further indicates that the legislature meant to
differentiate between “rooms” and “hotels” (as opposed to rooms in buildings that are
not hotels.) 35 ILCS 145/3(a).
These new-generation websites allow private individuals to rent or lease “rooms” in their
private residences. However, these rooms are not located within “hotels”: the “hosts”
are not in the business of running a “hotel,” insofar as (especially in multi-unit
condominiums or apartment buildings), they do not individually own or control the
“building”, they do not make the rooms within their private residences available to the
“public,” and they do not otherwise advertise, market or hold themselves out to be
innkeepers or hoteliers to the general public. There are no brochures, signs, marketing
materials, or other incidences of “hotels” or “inns” – often, the listings are advertising a
spare room with a couch or guest bed. Unlike a traditional hotel, inn, motel or bed-andbreakfast, there is no physical “shingle” that is hung that advertises to the general public
that there are rooms available within for rent. Everything is on the internet only, and
only visible to members of the website.
This type of activity clearly falls within a gray area in terms of how the tax might be
assessed and collected, as well as a question of equity in terms of where the burden of
paying the tax falls. While some “hosts” might voluntarily register their rooms as
“hotels” with the Illinois Department of Revenue, and might voluntarily pay taxes as
“hotel operators” to the State of Illinois, other “hosts” might not – out of ignorance,
confusion or genuinely held belief, or out of intentional refusal to pay. Further, as with
many issues regarding internet commerce, an issue of collectability arises for the State
of Illinois DOR: unless an Illinois resident voluntarily registers as a “hotel operator,” and
voluntarily remits taxes, the State has no way of independently knowing whether the
person is in fact operating as a “hotel” through these private, members-only websites,
unless the State subpoenas the confidential records of the website (which is usually
located out of state). A tax that can only be assessed and collected against “dogooders” who voluntarily register and pay, and cannot be assessed or collected against
“scofflaws” or those ignorant of the law, is unfair on its face and unsustainable.
The question is thus: are persons who occasionally list their residences (or rooms
within private residences) for short-term rental accommodations through a private,
exclusive and members-only website, subject to the various state and local hotel
operators taxes or not? Even if such persons are technically considered to be “hotel
operators” subject to a tax, will the Illinois Department of Revenue waive the
enforcement and collection of such taxes until it resolves the issue of unfairness?
The only statement I have seen form the Illinois Department of Revenue on this matter
is contained within Illinois DOR Publication 106. In particular, the question is asked, on
page 3: “I operate a private club and rent rooms only to club members and their
guests. Am I expemt [sic] from paying hotel tax?” The Illinois Departmnet [sic] of
Revenues’ answer is: “Since hotel tax is limited to the renting of rooms to the
public and your club restricts its renting of rooms to members and their guests,
you are not liable for hotel tax on your rental receipts from such rooms.”
Seemingly, the same answer would apply to the members-only websites where private

ST 12-0060-GIL
November 30, 2012
Page 3
individuals rent rooms to each other (but not to non-members in the general public) on a
short-term basis.
I am contemplating writing an article for the JOURNAL or similar legal publication to
clarify this issue. To the extent a formal opinion on this matter is issued, please direct it
to my attention, or if you have any questions or seek further information, or would like to
make an informal statement, please call me at the number listed above.
DEPARTMENT’S RESPONSE:
The Hotel Operators' Occupation Tax Act (“HOOT”) imposes a tax upon persons engaged in the
business of renting, leasing or letting rooms in a hotel, as defined in the Act. HOOT defines “hotel” to
include any building or buildings in which the public may, for consideration, obtain living quarters,
sleeping or housekeeping accommodations. See 35 ILCS 145/2(1).
HOOT defines “rent” as “the consideration received for occupancy, valued in money, whether
received in money or otherwise, including all receipts, cash, credits and property or services of any
kind or nature.” See 35 ILCS 145/2(6). The definition of “rent” must be read in conjunction with the
term “occupancy.” HOOT defines “occupancy” as “the use or possession, or the right to the use or
possession, of any room or rooms in a hotel for any purpose, or the right to the use or possession of
the furnishings or to the services and accommodations accompanying the use and possession of the
room or rooms.” See 35 ILCS 145/2(3).
There is no corresponding tax imposed upon hotel room occupants. Rather, a hotel operator may
reimburse himself for his HOOT liability by collecting a corresponding reimbursement charge from a
room occupant. Although a hotel operator may state the reimbursement charge as "hotel tax" on his
bill, it is nothing more than a reimbursement charge. Given the structure of the tax, the hotel operator
will incur HOOT liability on the rental receipts even when he is not reimbursed by the room occupant.
If a person engaged in the business of renting, leasing or letting rooms does not intend for its rooms
to be “exclusive” (like a school, hospital or private club) but, rather, welcomes and encourages “other
individuals and organizations” to use its facilities (e.g. rooms), even though those individuals or
organizations may be screened, the Department would generally consider the facilities open to the
public. In contrast, if a person engaged in the business of renting, leasing or letting rooms intends for
its rooms to be “exclusive” (e.g., rented only to members of a private club and not to the general
public), the Department would not consider the facilities open to the public and, thus, not be subject to
HOOT.
We are unable to give you the specific guidance you requested because the taxability or nontaxability
of the transactions outlined in your letter is dependent upon the specific facts surrounding those
transactions.
I hope this information is helpful. 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,

ST 12-0060-GIL
November 30, 2012
Page 4
Debra M. Boggess
Associate Counsel