Are hotel destination marketing fees subject to South Carolina's accommodations tax?

Plain-English summary

South Carolina Revenue Ruling #18-7 holds that destination marketing fees charged with transient lodging are subject to the 7% sales tax on accommodations.

Hotels and other lodging providers may state the fee as a fixed dollar amount per room per night or as a percentage of the room charge. They may retain the proceeds for their own advertising or remit them to a chamber of commerce, convention and visitors bureau, or similar organization for destination marketing. None of those variations changes the tax result.

The accommodations tax applies to all value proceeding or accruing from furnishing the room unless an exception applies. The Department uses a “but for” test: but for the lodging transaction, the provider would not receive the marketing fee. The fee is therefore part of accommodation gross proceeds.

What this means for you

Hotels and lodging providers

Include destination and hotel marketing fees in the 7% accommodations-tax base, even when separately stated on the guest folio.

Tourism organizations

Remitting the fee to an outside tourism organization does not remove it from the lodging provider's taxable gross proceeds.

Booking and billing systems

Apply accommodations tax to both flat per-night marketing fees and percentage-based fees collected as part of the room transaction.

Common questions

Q: Is a separately stated marketing fee excluded?
A: No. Separate statement does not change that it arises from furnishing the accommodation.

Q: Does the result change if the hotel keeps the money?
A: No. The ruling reaches the same result whether the hotel keeps it or sends it to an outside tourism organization.

Q: What tax does this ruling address?
A: The 7% South Carolina sales tax on accommodations under § 12-36-920(A).

Citations and references

• S.C. Code Ann. § 12-36-60 — accommodations included in tangible personal property
• S.C. Code Ann. § 12-36-90 — gross proceeds
• S.C. Code Ann. § 12-36-920(A) — 7% accommodations tax
• Meyers Arnold v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920 (1985)

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR18-7.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #18-7

SUBJECT:

Destination Marketing Fees
(Sales Tax on Accommodations)

EFFECTIVE DATE:

Applies to all periods open under the statute.

REFERENCES:

S.C. Code Ann. Section 12-36-60 (2014)
S.C. Code Ann. Section 12-36-90 (2014; Supp. 2017)
S.C. Code Ann. Section 12-36-920(A) (Supp. 2017)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public. It is an advisory opinion issued to apply principles of tax
law to a set of facts or general category of taxpayers. It is the
Department’s position until superseded or modified by a change in
statute, regulation, court decision, or another Department advisory
opinion.

Question:
Are charges for destination marketing fees, as described below, subject to the 7% sales tax on
accommodations under Code Section 12-36-920(A)?
Conclusion:
Charges for destination marketing fees, as described below, are subject to the 7% sales tax on
accommodations under Code Section 12-36-920(A).
Background:
Many hotels and other businesses furnishing accommodations in South Carolina charge
“destination marketing fees,” “hotel marketing fees,” or other similar service charges (hereafter
referred to as “marketing fees”). Marketing fees are charged as separate line items on customer
bills at the rate of either a set dollar amount per room per night or a percentage of the charge for
accommodations.
1

The proceeds from the marketing fees are typically, but not always, remitted to an outside tourist
organization, such as a chamber of commerce or a convention and visitors bureau, which uses
the funds for tourism development and advertising to attract more tourists to the area. When the
marketing fees are retained by the provider of accommodations, they are similarly used for
advertising to draw potential customers to the establishment.
Discussion:
Code Section 12-36-920(A) imposes a 7% sales tax on accommodations. The statute reads, in
part:
A sales tax equal to seven percent is imposed on the gross proceeds
derived from the rental or charges for any rooms, campground
spaces, lodgings, or sleeping accommodations furnished to
transients by any hotel, inn, tourist court, tourist camp, motel,
campground, residence, or any place in which rooms, lodgings, or
sleeping accommodations are furnished to transients for a
consideration.
Under Code Section 12-36-90 the term gross proceeds includes the value proceeding or accruing
from the furnishing of accommodations. 1 Therefore, the 7% tax rate for accommodations applies
to all “value proceeding or accruing from” the furnishing of accommodations, unless there is an
applicable exception.
In Meyers Arnold v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920 (1985), the
Court of Appeals, in interpreting the definition of “gross proceeds of sales” with respect to layaway fees paid in conjunction with lay-away sales, held:
Section 12-35-30 [now Section 12-36-90] defines gross proceeds of
sales as “the value proceeding or accruing from the sale of tangible
personal property … without any deduction for service costs.” But
for the lay away sales, Meyers Arnold would not receive the lay
away fees. The fees are obviously charged for the services rendered
in making lay away sales. For these reasons, this court holds the lay
away fees are part of the gross proceeds of sales and subject to the
sales the tax.
Applying the test in Meyers Arnold to this issue, but for the furnishing of accommodations, the
hotel would not receive the marketing fee. As a result, under the Meyers Arnold test, the
marketing fees received as a result of furnishing accommodations are a part of gross proceeds.

1

For the purposes of South Carolina sales and use tax, the definition of “tangible personal property” includes the
“furnishing of accommodations.”

2

Based on the above, destination marketing fees are subject to the 7% sales tax on
accommodations under Code Section 12-36-920(A).
Note: See SC Regulation 117-307 for specific questions on various other charges by providers of
accommodations.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
May 14
, 2018
Columbia, South Carolina

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