Does renting furnished corporate apartments for one week to one year count as operating a taxable hotel, or is it an untaxed real estate rental?

Plain-English summary

Korman Communities operates a 124-unit apartment building in White Plains. About half the units are leased unfurnished to long-term tenants under yearly leases; the other half are fully furnished "corporate apartments" leased month-to-month (generally one month to one year, with occasional one-week-to-one-month stints as a marketing tool) to companies housing employees on temporary assignments. No stays under a week are allowed, and there's no transient or overnight rental at all. The building has a 24-hour front desk but no pool, gym, restaurant, room service, or concierge; monthly housekeeping is available at no extra charge (declinable), and the company was considering adding a fitness/business center and free continental breakfast in the future.

New York taxes "hotel" occupancy — a building regularly used and kept open for the lodging of guests, which can include an "apartment hotel" — but NOT genuine real estate rentals where a true landlord-tenant relationship exists. The Department found this arrangement currently looks like real estate rental rather than hotel operation: both the furnished and unfurnished units get similar services (front desk, coffee), stays don't function like transient hotel guests, and none of the customary hotel amenities (food service, entertainment, concierge) are present. So under its current facts, Korman's rentals — both furnished and unfurnished — aren't subject to the hotel occupancy tax.

But the Department flagged this conclusion as fact-dependent and warned it could flip: if Korman starts offering things like a continental breakfast (a "customary hotel service," unlike ordinary landlord perks) alongside its short-term corporate leases, that combination could push the operation over the line into a taxable hotel. And if it ever did become a taxable hotel, corporate guests staying 90+ consecutive days would still qualify for the permanent-resident exemption — tax collected up to that point becomes refundable once the 90-day mark is reached.

What this means for you

Extended-stay and corporate-housing operators

Whether you're running a "hotel" for tax purposes hinges on the whole package: minimum-stay length, whether services are offered equally to long-term and short-term residents, and whether you provide customary hotel amenities (food service, entertainment, concierge, room service). Adding amenities that read as hotel-style — even something as simple as continental breakfast — can tip a currently-exempt operation into a taxable one, especially when paired with short-term corporate leases.

Landlords with a mixed furnished/unfurnished portfolio

Treating furnished and unfurnished units the same way (same front-desk services, same lease-renewal mechanics, same eviction procedures) supports the real-estate-rental characterization. Revisit your tax position whenever you change your amenity mix or shorten your minimum stay.

Accountants and tax professionals

This ruling is a useful contrast to the classic hotel-vs-landlord line of authority (Juliana Motel, KPMG Peat Marwick) — the key factual levers are minimum stay length, parity of services across furnished/unfurnished tenants, and presence/absence of customary hotel amenities, not just how the building is marketed.

Common questions

Q: Is a furnished corporate apartment building automatically a taxable hotel?
A: No — it depends on the minimum stay length, whether hotel-type amenities are offered, and whether the arrangement functions as a genuine landlord-tenant relationship rather than transient lodging.

Q: Would adding a continental breakfast make this a taxable hotel?
A: The Department flagged that adding customary hotel services like a continental breakfast, combined with short-term corporate leases, could push the operation toward taxable hotel status.

Q: If it did become a taxable hotel, would long-term corporate guests get any relief?
A: Yes — any guest staying 90+ consecutive days would qualify as a permanent resident, and tax collected on that occupancy becomes refundable once the 90-day threshold is reached.

Q: Can another extended-stay operator rely on this Advisory Opinion?
A: No. It binds the Department only for the petitioner and facts described, and the Department explicitly noted its own conclusion could change if the facts change.

Citations and references

Statutes, regulations, and guidance:

• Tax Law §§ 1101(c)(1), (5); 1105(e)
• 20 NYCRR 527.9(a), (b)(1), (b)(8), (e)(5)
• TSB-M-03(1)S (permanent resident exception)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2006.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-06(1)S
Sales Tax
January 4, 2006

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S040227A

On February 27, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Korman Communities, 450 Plymouth Meeting, Suite 300, Plymouth
Meeting, PA 19462. Petitioner, Korman Communities, provided additional information
pertaining to the Petition on April 13, 2004.
The issue raised by Petitioner is whether Petitioner’s rental of apartment units is
considered the operation of a hotel for purposes of the sales tax imposed upon hotel occupancies.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner operates a 124-unit residential apartment building in White Plans, New York
(the “Property”). About half of the units are rented unfurnished to tenants under yearly leases.
The other half are fully furnished units that are almost always rented for periods of one month to
one year, generally to corporate clients whose employees are working in or near White Plains on
long-term temporary assignments. Shorter stays of one week to one month are occasionally
available at the Property as a marketing tool to recruit new clients. No stays of less than one
week are permitted and the Property does not rent rooms to transient or overnight guests.
Petitioner plans to convert all units at the Property to furnished corporate apartments over the
next several years.
Except for the occasional client recruitment leases, residents of furnished corporate
apartments must sign a lease for a minimum stay of 30 days. The monthly lease renews
automatically at the end of each month. If either Petitioner or client wants to terminate the lease,
written notice must be provided to the other party at least 15 days prior to the lease’s
termination; an early termination fee may apply if proper notice is not provided. When signing
the lease, the client makes a security deposit by providing a corporate credit application or credit
card number that Petitioner may bill for any incidental charges or damage to the apartment
during the lease term. Petitioner complies with applicable landlord-tenant law for all formal
eviction proceedings.
Each furnished unit includes a full kitchen, bedroom, bathroom, dining room and living
room. The kitchen is fully equipped with a stove, microwave, refrigerator, dishwasher, pots and
pans, plates, glassware, utensils, coffee maker and toaster. The living room is furnished with a
sofa, chair, coffee table, and entertainment center including a television and DVD player. The
dining room includes a dining table and chairs. The bedroom is furnished with a bed, desk,
chair, and bedside tables. Each furnished unit includes a set of bed linens and towels. No units

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include a laundry room. However, certain floors in the building feature a common area laundry
room.
For all leases of more than one month, monthly housekeeping is available at no separate
charge to all furnished apartments. Residents are free to accept or decline the service. More
frequent housekeeping service may be available for an additional charge. The bed linens and
towels in each apartment are changed during the monthly housekeeping.
The Property does not feature a swimming pool, tennis court, fitness center, business
center, restaurant, room service, conference rooms, banquet hall, or valet parking. Over the next
several years, a fitness center and business center may be added.
The Property has no doorman. However, the apartment building has a 24-hour front desk
representative who greets residents, accepts packages, manages dry-cleaning services and
responds to resident requests. The front desk staff does not collect rent, accept new leases, or
participate in management, billing, or collections. The Property will be staffed with a full-time
management team that works only during regular business hours, including a general manager,
assistant manager and sales staff. During regular hours, the management team will show
available units to prospective residents, negotiate new leases, accept rent payments, and handle
other resident issues. The Property’s staff will also include a full-time maintenance team
including a building superintendent, mechanic, and maintenance personnel.
The monthly rent for each furnished corporate apartment includes all utilities, including
heat, water, electricity, basic cable television, and local telephone service. A separate charge
will apply for long distance phone calls.
The Property does not now provide breakfast to its residents but may in the future
provide a free continental breakfast available to all residents. Free coffee and tea are currently
available during the day to all residents.
Applicable law and regulations
Section 1101(c) of the Tax Law provides, in part:
When used in this article for the purposes of the tax imposed under subdivision
(e) of section eleven hundred five, the following terms shall mean:
(1) Hotel. A building or portion of it which is regularly used and kept open as
such for the lodging of guests. The term "hotel" includes an apartment hotel, a motel,
boarding house or club, whether or not meals are served.
*

*

*

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(5) Permanent resident. Any occupant of any room or rooms in a hotel for at least
ninety consecutive days shall be considered a permanent resident with regard to the
period of such occupancy.
Section 1105(e) of the Tax Law imposes sales tax on “[t]he rent for every occupancy of a
room or rooms in a hotel in this state, except that the tax shall not be imposed upon (1) a
permanent resident, or (2) where the rent is not more than at the rate of two dollars per day.”
Section 527.9 of the Sales and Use Tax Regulations provides, in part:
(a) Imposition. A sales tax is imposed on every occupancy of any room or
rooms in a hotel, motel or similar establishment at the combined statewide and
local sales tax rate in effect at the situs of such establishment, except that the tax
shall not apply to (1) the charges for occupancy by a permanent resident, or (2)
where the charge is $2 or less per day.
(b) Definitions. As used in this section, the following terms shall mean:
(1) Hotel. A building or portion of it, which is regularly used and kept
open for the lodging of guests. The term hotel includes but is not limited to an
apartment hotel, a motel, bungalow or cottage colony, boarding house or club,
whether or not meals are served.
*

*

*

(8) Permanent resident.
(i) (a) For purposes of the taxes imposed under sections 1105 and 1109 and
pursuant to the authority of article 29 of the Tax Law, any occupant of any room or
rooms in a hotel for at least 90 consecutive days shall be considered a permanent resident
with regard to the period of such occupancy. There is no tax on the charge for occupancy
of a hotel room by a permanent resident. The hotel operator must collect the taxes
imposed under sections 1105 and 1109 and, pursuant to the authority of article 29 of the
Tax Law, from the occupant until the occupancy reaches 90 days. When continuous
occupancy reaches 90 days, the sales tax collected under sections 1105 and 1109 and,
pursuant to the authority of article 29 of the Tax Law, is refundable to the occupant. If
any part of such tax has been paid to the Department of Taxation and Finance, the
operator may take a credit on the next timely filed return.
*

*

*

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(e) Nontaxable occupancy. The following occupancies are not subject to
tax on hotel occupancy:
*

*

*

(5) Bungalows. A lessor of bungalows, who rents bungalows which are
furnished living units limited to single-family occupancy, is not the operator of a
hotel. Therefore, the rents for the occupancy of such bungalows are not taxable,
provided:
(i) no maid, food or other common hotel services, such as
entertainment or planned activities, are provided by the lessor; and
(ii) the rental is for at least one week.
The furnishing of linen by the lessor with the rental of a bungalow,
without the service of changing the linen, does not alter the nontaxable status of
the rental charges.
Opinion
Rentals of housekeeping and efficiency units for a term of at least one week have been
determined not subject to the imposition of sales tax in accordance with section 527.9(e)(5) of
the Sales and Use Tax Regulations, if no maid, food or other common hotel services or planned
activities are provided to the occupants. See Juliana Motel, Adv Op Comm T&F, May 23, 1991,
TSB-A-91(44)S.
Similarly, leases and subleases of furnished apartments to lessees/tenants for periods
ranging from one month to one year or longer, where tenants could subscribe to an optional
package from the “landlord” for light cleaning, supplies, linen and laundry, have been
determined not subject to the sales tax on hotel occupancy. See KPMG Peat Marwick, Adv Op
Comm T&F, February 13, 1991, TSB-A-91(21)S. Unlike hotels, motels, apartment hotels or
similar establishments as defined under section 1101(c)(1) of the Tax Law and section
527.9(b)(1)of the Sales and Use Tax Regulations, the landlord in KPMG Peat Marwick, supra,
did not offer lodging or occupancy to transients on a regular or daily basis, but rather the
landlord rented real property and entered into valid landlord and tenant relationships with the
occupants.
Petitioner operates a 124-unit residential apartment building of which half the units are
currently rented unfurnished to tenants pursuant to leases of one year or more. Petitioner plans to
convert these unfurnished apartment rental units to furnished corporate apartments. Petitioner
also may in the future provide a fitness center, business center and free continental breakfast for

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corporate customers. Petitioner currently offers the unfurnished apartments to long term tenants
under yearly leases and the furnished apartments to corporate customers with stays varying from
one week to one year. Though the rental of the unfurnished apartments pursuant to long term
leases appears to constitute a lease of real property establishing a landlord-tenant relationship
between the parties, Petitioner’s rental of furnished apartments for shorter periods of time may
represent the operation of a hotel.
Under Petitioner’s current circumstances, its corporate customers generally enter into
leases which appear to include provisions and provide for services similar to those contracted for
the rental of the unfurnished apartments to long term tenants. While services such as front desk
staff and free coffee are offered, it appears these services are equally offered to the long term
tenants. Petitioner’s current rentals of both furnished and unfurnished apartment units appear to
constitute nontaxable real estate rentals rather than the operation of a hotel providing occupancy
to transient residents. Therefore, presuming Petitioner currently does not offer additional
amenities or services customarily offered by hotels (e.g., food services, entertainment, concierge)
to its customers, it appears that Petitioner is not operating a hotel subject to the sales tax imposed
on hotel occupancy by section 1105(e) of the Tax Law.
It should be noted, however, that the determination of whether Petitioner is operating a
hotel depends on the specific facts presented by Petitioner, and may change if the details
concerning the operation of the Property change. Petitioner’s plans to convert the Property to
furnished units for occupancy by corporate clients may be a change in the nature of its business
operations. The apartments will not necessarily be leased to tenants on a long term basis.
Further, Petitioner may add other amenities such as a continental breakfast. The provision of
continental breakfasts along with linen and laundry services are customary hotel services and not
services customarily provided by landlords to their tenants. The provision of these or other
amenities and services which are customary amenities and services of a hotel, combined with
short term leases for corporate clients, may indicate that Petitioner’s business is the operation of
a building regularly kept open for the lodging of guests within the meaning of a hotel pursuant to
section 1101(c)(1) of the Tax Law. Therefore, if changes in the operations of the Property
occur, Petitioner’s charges to its guests for rent may constitute a charge for occupancy subject to
the tax imposed by section 1105(e) of the Tax Law.
It should be noted that section 1105(e) of the Tax Law provides an exemption from tax
for hotel occupancy by permanent residents. Any occupant of a room or rooms in a hotel for at
least 90 consecutive days is considered a permanent resident with regard to the period of such
occupancy. As Petitioner expects its corporate customers will have stays from one week to one
year, some corporate customers would ultimately qualify as permanent residents. Therefore, if
Petitioner did operate a hotel, Petitioner would be required to collect the tax imposed under
section 1105(e) of the Tax Law from such occupants until the occupancy reached 90 days.
When continuous occupancy reached 90 days, the sales tax collected under section 1105(e)
would be refundable. See section 527.9(a)(8) of the Sales and Use Tax Regulations. For more

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information about occupancy by a permanent resident, see Technical Services Bureau
Memorandum entitled Sales Tax on Rent for Hotel Occupancy and the Exception for Permanent
Residents, February 18, 2003, TSB-M-03(1)S.

DATED: January 4, 2006

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.