Does a bed-and-breakfast reservation service that books rooms for travelers have to collect sales tax on its charges?

Plain-English summary

Bed & Breakfast U.S.A., Ltd. is a reservation service: it gives travelers ("guests") listings of available bed-and-breakfast homes ("hosts") and makes the reservation with the chosen host. Guests pay the agency a 50% deposit and pay the balance to the host on arrival. Hosts are not required to book exclusively through the agency. The agency charges guests a $15 booking fee (or $25 annual dues) and charges hosts 20%. It asked whether it must collect sales tax on its charges.

The Department held the agency is a booking/travel agent and need not collect tax — but the hosts, as hotel operators, must (and their taxable rent includes the agency's commission).

• The hosts run "hotels." Section 1105(e) taxes the rent for hotel occupancy. A "hotel" (§ 1101(c)(1); 20 NYCRR 527.9(b)(1)) is a building regularly used and kept open for lodging guests, including a boarding house, motel, or club. Anyone renting rooms the way these hosts do is a hotel operator for sales tax and must collect the tax — even if a local ordinance would not treat them as a hotel.
• The agency is acting as a travel agent. Because the hosts are not obligated to accept the agency's referrals, are free to take guests from other sources, and the agency receives only a deposit, the agency is "acting in the same capacity as a booking or travel agent" and is not required to collect tax on its charges.
• But the commission is part of the taxable rent. Since the agency is deemed to receive a commission, the total amount on which the hosts must collect tax must include the agency's commission or any other amount the agency collects on the hosts' behalf.

What this means for you

A room host is a "hotel" even if it's a private home. If you rent rooms to travelers on a regular basis, New York treats you as a hotel operator who must collect sales tax on the rent — regardless of how your town zones or licenses you.

A genuine booking agent isn't the one collecting the room tax. A reservation service that merely lists non-exclusive hosts, makes bookings, and takes a deposit is treated as a travel agent — it doesn't collect the hotel tax on its own service charges. The exempt treatment rests on the host, not the agent, being the seller of the lodging.

The agent's commission doesn't escape the tax — it rides along on the host's bill. The rent the host must charge tax on includes the agent's commission and anything else the agent collects for the host. So the commission is captured in the room tax even though the agent itself isn't the collector.

Common questions

Q: I run a small B&B booked through an agency. Do I collect sales tax on the room?
A: Yes. As a host regularly renting rooms, you are a hotel operator and must collect sales tax on the rent — including the portion representing the booking agent's commission.

Q: I operate the reservation service. Do I collect tax on my booking fees?
A: Not under these facts. Because your hosts aren't exclusive and you take only a deposit, you're treated as a travel/booking agent and don't collect the hotel tax on your charges.

Q: How is the agent's commission taxed?
A: It's built into the taxable rent the host collects tax on. The host's tax base must include the agent's commission or any amount the agent collects on the host's behalf.

Citations and references

Statutes and regulation:

• Tax Law § 1105(e) — taxes the rent for hotel occupancy
• Tax Law § 1101(c)(1) — defines "hotel" (a building regularly used and kept open for lodging guests)
• 20 NYCRR 527.9(b)(1) — defines "hotel" for sales tax purposes

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87 (29)S
Sales Tax
August 31, 1987

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S870506A

On May 6, 1987, a Petition for Advisory Opinion was received from Bed & Breakfast U.S.A.,
Ltd, 129 Grand St., Croton-on-Hudson, New York 10520.
The issue raised is whether a "bed and breakfast" booking agency which operates in the
following manner is required to collect sales tax on its charges.
Petitioner is a "reservation service" engaged in the business of providing listings of available
bed and breakfast homes ("hosts") to travelers ("guests") wishing to stay at bed and breakfast homes.
Petitioner also makes the reservation for the guest with the desired host.
Guests pay to Petitioner a deposit of 50% of the rental and remit the balance to the host upon
arrival. Hosts are not required to book exclusively through Petitioner's agency. Petitioner represents
some small inns as well as individual home owners. Petitioner charges guests a $15 fee for its
booking service or the guests may pay annual dues of $25. Petitioner charges hosts 20% for its
service.
Section 1105(e) of the Tax Law imposes a tax on "the 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 1101(c)(1) of the Tax Law defines the term "hotel" as follows:
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.
Section 527.9(b)(1) of the Sales and Use Tax Regulations defines the term "hotel" as follows:
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.
Notwithstanding the fact that local ordinances may not consider Petitioner's hosts to be
hotels, anyone who rents rooms in the manner of Petitioner's hosts would be considered the operator
of a hotel for sales tax purposes and required to collect sales tax.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-87 (29)S
Sales Tax
August 31, 1987

Because Petitioner's hosts are not obligated to accept referrals from Petitioner, are free to
accept guests from other sources and because Petitioner receives only a deposit from guests,
Petitioner is acting in the same capacity as a booking or travel agent and thus not required to collect
tax. However, since Petitioner is deemed to be receiving a commission, the total amount upon which
Petitioner's hosts are required to collect tax must include Petitioner's commission or any other
amount which Petitioner collects on behalf of its hosts.

DATED: August 31, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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