Under the now-superseded RR 98-21, how were hotel room charges, mandatory fees, optional services, packages, and cancellations taxed?
Apply this to your situation
This page answers the general question as of 1998. Ezel answers yours, under current South Carolina tax law, with citations.
Plain-English summary
South Carolina Revenue Ruling 98-21 sorted hotel and motel receipts into room charges, additional guest charges, and transactions taxed under another sales-tax rule. Its numerical examples used a 7% accommodations rate and a 5% additional-guest-charge or retail-sales rate.
Charges bundled into the room, and mandatory fees for services customarily provided with it, generally stayed in the accommodations base. That included mandatory maid service, daily phone availability, and daily movie availability even when separately stated.
Optional use-based services could be additional guest charges. The ruling treated per-call telephone charges, long-distance calls, optional maid service, per-view movies, separately requested newspapers, separately charged valet parking for guests, and qualifying meeting-room rentals as additional guest charges under its then-current definition.
Some optional transactions were taxed under other provisions instead: separately sold meals, linen or bicycle rentals, and minibar items were retail sales rather than additional guest charges. Actual cancellation fees were not taxable, while a no-show room charge remained taxable because the guest retained the right to use the accommodations.
Major categories in the ruling
- Room and mandatory service charges: taxed as accommodations under the stated 7% rate.
- Optional guest services over and above the room: often taxed at the stated 5% additional-guest-charge rate.
- Separately sold property or meals: taxed under the ordinary retail-sales rule instead of as additional guest charges.
- Tourist packages: allocated among the hotel, golf course, restaurant, and other providers based on supported amounts.
- Meeting rooms: an extra charge connected with guest-room rentals was an additional guest charge; a stand-alone rental to a non-guest was not under the ruling, subject to the organization exception described.
- No-shows versus cancellations: keeping a room charge for a no-show was taxable; a fee or deposit retained after an actual cancellation was not.
Common questions
Q: Did separately stating a mandatory charge remove it from the room rate? No. The ruling said a separately stated fee could still be part of the accommodations charge when mandatory or customary.
Q: Were optional rentals always additional guest charges? No. Linen and bicycle rentals were sales or rentals of tangible personal property taxed under another provision.
Q: Who had to prove that a charge was separate from the room? The taxpayer. The ruling placed the burden on the hotel to prove that a charge was for a service over and above those customarily provided with the room.
Q: Is RR 98-21 current? No. RR 14-5 expressly superseded it and applied later statutory changes.
Citations and references
- S.C. Code Ann. § 12-36-920 (accommodations and then-defined additional guest charges)
- S.C. Code Ann. § 12-36-910 (retail sales of meals and tangible personal property discussed)
- Anonymous v. South Carolina Department of Revenue, 97-ALJ-17-0263-CC and 97-ALJ-17-0379-CC (April 24, 1998) (package no-shows and cancellations discussed)
- SC Revenue Ruling #14-5 (expressly superseded RR 98-21)
Subject
Charges by Hotels and Motels
Source
- Landing page: https://dor.sc.gov/advisory-opinion-search
- Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR98-21.pdf
Original ruling text
State of South Carolina
Department of Revenue
301 Gervais Street, P.O. Box 125, Columbia, South Carolina 29214
SC REVENUE RULING #98-21
SUBJECT:
Charges by Hotels and Motels
(Sales Tax and Tax on Additional Guest Charges)
EFFECTIVE DATE:
Applies to all periods open under the statute.
SUPERSEDES:
SC Revenue Ruling #88-2
SC Revenue Ruling #89-17
SC Revenue Ruling #97-3
REFERENCE:
S.C. Code Ann. Section 12-36-920 (Supp. 1997)
AUTHORITY:
S.C. Code Ann. Section 12-4-320 (Supp. 1997)
SC Revenue Procedure #97-8
SCOPE:
A Revenue Ruling is the Department of Revenue's official advisory
opinion of how laws administered by the Department are to be applied
to a specific issue or a specific set of facts, and is provided as guidance
for all persons or a particular group. It is valid and remains in effect until
superseded or modified by a change in the statute or regulations or a
subsequent court decision, Revenue Ruling or Revenue Procedure.
LAW:
Code Section 12-36-920 imposes a sales tax upon accommodations and "additional guest
charges" and reads, in part:
(A) 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. This tax does not apply
where the facilities consist of less than six sleeping rooms, contained in a single building,
which is used as the individual's place of abode. The gross proceeds derived from the
lease or rental of sleeping accommodations supplied to the same person for a period of
ninety continuous days are not considered proceeds from transients. The tax imposed by
this subsection (A) does not apply to additional guest charges as defined in subsection
(B).
(B) A sales tax of five percent is imposed on additional guest charges at any place where
rooms, lodgings, or accommodations are furnished to transients for a consideration,
unless otherwise taxed under this chapter. The term 'additional guest charges' includes,
but is not limited to:
1
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
room service;
amenities;
entertainment;
special items in promotional tourist packages;
laundering and dry cleaning services;
in-room movies;
telephone charges;
rentals of meeting rooms; and
other guest services.
Furthermore, Commission Decision #95-27 held that "the term 'additional guest charge' means
an amount which is added to the guest's room charge for a specific amenity or service for the
guest."
Therefore, charges for rooms, lodgings and accommodations are taxed at 7%, while other
charges for other services provided at the hotel, when over and above the services customarily
provided with the room, are taxed at 5% as an "additional guest charge." However, if an
"additional guest charge" would be taxed under other provisions of the sales and use tax law
(Chapter 36 of Title 12), then such charges are not taxed as an "additional guest charge."
It should therefore be noted that the determination as to what services, if any, are over and above
the services customarily provided with the room must be based on all of the facts and
circumstances.
The burden of proof that a charge is an additional guest charge, and not part of the price
for the room, rests with the taxpayer. Failure to prove that a particular charge is for a
service that is over and above the services customarily provided with the room will subject
the charge to the 7% tax rate.
QUESTIONS AND ANSWERS:
The following questions and answers are intended to provide guidance with respect to the
provisions of Code Section 12-36-920. These questions and answers use examples to illustrate
Department policy.
TELEPHONE CHARGES
- Q.
If a hotel charges $100.00 for a room, and that price includes the room and use of the
phone for local calls, what tax rate applies to the $100.00?
A.
The $100.00 charge would be subject to a tax rate of 7%. The use of the phone is a part
of the services offered and provided with the room for the $100.00. Therefore, it is not
an additional guest charge.
- Q.
If a hotel charges $80.00 per day for a room, and the customer is also charged $5.00 per
day for the availability of the phone for local calls, what tax rate applies to each of the
charges?
2
A.
The $80.00 room charge and the $5.00 telephone charge are taxed at 7%. The
availability of a phone is a part of the services offered and provided with a room. The
$5.00 is charged whether or not the guest uses the phone. Therefore, it is not an
additional guest charge when the charge is based on a per day rate.
- Q.
If a hotel charges $80.00 per day for a room, and the customer is also charged $1.00 per
local phone call, what tax rate applies to each of the charges?
A.
The $80.00 room charge is taxed at 7%. Each $1.00 phone charge is taxed at 5%. The
availability of a phone is a part of the services offered and provided with a room;
however, the use of the phone for a local call is over and above the services customarily
provided with the room. Guests expect to pay a charge for each local call made from
the room phone. Therefore, the $1.00 is an additional guest charge when the charge is
based on a per call basis. (See Commission Decision #93-66.)
- Q.
A.
If a hotel charges $80.00 for a room, and the customer is also charged $20.00 for
various long distance calls made, what tax rate applies to each of the charges?
The $80.00 room charge is taxed at 7%, while the remaining charges for the long
distance calls are taxed at 5% as additional guest charges. The Department, in Decision
92-11 held that the charges for long distance telephone calls were not otherwise taxed
under Chapter 36 and were therefore taxable as additional guest charges. (See also
Commission Decision #93-66.)
MAID SERVICE
- Q.
If a hotel charges $100.00 for a room, and that price includes maid service, what tax
rate applies to the $100.00?
A.
The $100.00 charge would be subject to a tax rate of 7%. Since the maid service is a
service provided with the room, it is not an additional guest charge.
- Q.
If a hotel charges $80.00 for a room, and the customer also must pay a mandatory
$20.00 charge for maid service, which may or may not be separately stated, what tax
rate applies to each of the charges?
A.
The $80.00 room charge and the $20.00 maid service charge are taxed at 7%. The
maid service is part of the services provided with the room. The fact that it may be
separately charged does not necessarily make the charge an additional guest charge. In
this case the maid service is mandatory, and therefore, the actual charge for the room is
$100.00 which is taxed at 7%.
- Q.
If a rental agency charges $800.00 per week for a condominium unit, and the customer
also must pay a mandatory $50.00 charge for maid service at the end of the week, what
tax rate applies to each of the charges?
3
A.
The $800.00 weekly unit charge and the $50.00 maid service charge are taxed at 7%.
The maid service is part of the services provided with the unit. The fact that it may be
separately charged does not necessarily make the charge an additional guest charge.
The maid service is mandatory, and therefore, the actual charge for the unit is $850.00,
which is taxed at 7%.
- Q.
If a rental agency charges $800.00 per week for a condominium unit, and the customer
is required to leave the unit in a clean condition, what tax rate applies to each of the
charges if the customer has the option to have the rental agency clean the unit at the end
of the week for $50.00?
A.
The $800.00 weekly unit charge is taxed at 7% and the $50.00 maid service charge is
taxed at 5%. The $50.00 optional maid service is provided over and above the services
provided with the unit. The $50.00 is therefore an additional guest charge subject to
the tax at 5%.
- Q.
If a rental agency charges $800.00 per week for a condominium unit, a mandatory
$50.00 charge for maid service at the end of the week, and the customer has the option
to receive daily maid service for $20.00 a day, what tax rate applies to each of the
charges?
A.
The $800.00 weekly unit charge and the $50.00 maid service charge are taxed at 7%.
The maid service is part of the services provided with the unit. The maid service is
mandatory, and therefore, the actual charge for the unit is $850.00, which is taxed at
7%. The $20.00 optional maid service is provided over and above the services
provided with the unit. The $20.00 is therefore an additional guest charge subject to
the tax at 5%.
IN-ROOM MOVIES
- Q.
If a hotel charges $100.00 for a room, and that price includes the in-room movies at no
extra charge, what tax rate applies to the $100.00?
A.
The $100.00 charge would be subject to a tax rate of 7%. The availability of in-room
movies is a part of the services offered and provided with the room for the $100.00.
Therefore, it is not an additional guest charge.
- Q.
If a hotel charges $80.00 per day for a room, and the customer is also charged a
mandatory fee of $5.00 per day for in-room movies (whether or not the guest watches
any movies), what tax rate applies to each of the charges?
A.
The $80.00 room charge and the mandatory $5.00 in-room movie charge are taxed at
7%. The availability of in-room movies is a part of the services offered and provided
with a room. The $5.00 is charged whether or not the guest watches the movies.
Therefore, it is not an additional guest charge when the charge is based on a per day
rate and the guest is charged whether or not the movies are watched.
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12. Q.
If a hotel charges $80.00 per day for a room, and the customer is also charged $7.00 for
each in-room movie he watched, what tax rate applies to each of the charges?
A.
The $80.00 room charge is taxed at 7%. The $7.00 movie charge is taxed at 5%. The
availability of in-room movies is a part of the services offered and provided with a
room; however, the charge for viewing a movie is over and above the customary charge
for the room. Guests expect to pay a charge for each movie viewed. Therefore, the
$7.00 is an additional guest charge when the charge is based on a separate charge for
watching the movie. The tax on this additional guest charge is the liability of the hotel,
regardless of whether or not service is being provided by a third party or the hotel itself.
(See Commission Decision #95-26.)
MEALS
- Q.
If a hotel charges $100.00 for a room, and that price includes a continental breakfast for
the guest, what tax rate applies to the $100.00?
A.
The $100.00 charge is taxed at 7%. Since the continental breakfast is provided with the
room, it is not an additional guest charge. (The withdrawal of the food from the hotel's
inventory is subject to the sales tax based on its fair market value. See Code Section
12-36-90, Code Section 12-36-110 and Commission Decision #93-66.)
- Q.
If a hotel charges $100.00 for a room, and also charges the guest a separately stated
$20.00 "club" fee, what tax rate applies to each of the charges? (The "club" fee, for that
extra $20.00, provides the guest access to a buffet meal that is not available to other
guests.)
A.
The Department, in Decision #92-32, held that the separately stated charge of $20.00
was not part of the charge for the room but a retail sale of the meal to the guest.
Therefore, the charges are taxed as follows: 7% tax applies to the $100.00 charge for
the room and 5% tax applies to the $20.00 charge for the meal. The meal is not taxed
as an additional guest charge under Code Section 12-36-920(B) since it is otherwise
taxed at 5% under Chapter 36 - Code Section 12-36-910.
LINENS
- Q.
If a rental agency charges $800.00 per week for a condominium unit, and the customer
has the option to rent linens for $50.00 for the week, what tax rate applies to each of the
charges?
A.
The $800.00 weekly unit charge is taxed at 7%. The rental of the linens is optional and
not part of the services provided with the unit for the $800.00 charge. The $50.00
rental of the linens is not an additional guest charge since the rental charge for the
linens is a sale of tangible personal property and is otherwise taxed at 5% under
Chapter 36 - Code Section 12-36-910.
5
GOLF AND OTHER TOURIST PACKAGES
- Q.
If a hotel has a "golf package" for $100.00 per night, and the customer is entitled to a
room at the hotel, one round of golf at a golf course at no extra charge, and a meal at no
extra charge, what tax rate applies?
A.
Based on the department’s longstanding administrative policy concerning tourist
packages (See SC Revenue Ruling #88-2) 1 , the $100 charge would be subject to the 7%
tax, except any portion forwarded to the golf course for payment of the green fee and
any portion forwarded to the restaurant for payment of the meal. However, see the one
exception in the "Note" in Example #1.
The following examples best explain this longstanding administrative policy:
Example #1: The hotel receives $100 from the guest for the golf package. The hotel
pays the golf course $30 for the guest's green fee and pays the restaurant $5 for the
guest’s meal.
The hotel would be liable for the 7% tax on $65 ($100 - $35). The golf course would be
liable for the 5% admissions tax on $30 and the restaurant would be liable for 5% sales
tax on the sale of the meal. This calculation must be made on a guest by guest basis. In
other words, the 7% tax due will be determined for each guest by multiplying 7% by
the total charge for the package less the portion forwarded to the golf course for
payment of the green fee and the portion forwarded to the restaurant for payment of the
meal.
Note: If the hotel’s guest is unable to play golf that day ("No-Show ") (but still received
the meal), and under terms of the golf package the guest will not be required to pay the
"green fee portion" of the package, the hotel would be liable for the 7% tax on the
amount it received from the guest less the amount paid by the hotel to the restaurant.
For example, if the hotel determined that the "green fee portion" of the $100 package
was $30 and required the guest to only pay $70 for that day, then the hotel would be
liable for the 7% tax on $65 and the restaurant would be liable the 5% sales tax on the
sale of meal.
If the hotel’s guest is unable to play golf that day ("No-Show") (but still received the
meal), and under terms of the golf package the guest must still pay the hotel the full
$100, the hotel would be liable for the 7% tax on the "accommodations portion" of the
package. The golf course would not be liable for the 5% admissions tax since the guest
did not play golf and the golf course did not receive an admissions fee from the hotel.
However, the hotel is liable for the 5% tax on the other portion of the $100 paid by the
guest since it now represents an additional guest charge for the service of making the
golf arrangements that were not used. This additional guest charge will be equal to the
green fee that the hotel would have had to pay to the golf course. In other words, if the
hotel would have been required to pay $30 had the guest played golf, then the
1
This policy has been consistent since 1988 and did not change when the sales and use tax law
under Chapter 35 of Title 12 was recodified in 1991 as Chapter 36 of Title 12.
6
additional guest charge would be $30. As such, the hotel would be liable for the 7%
tax on $65 and the 5% tax (as an additional guest charge for the service) on $30 and
the restaurant would be liable for the 5% sales tax on the sale of the meal. See
Anonymous v. South Carolina Department of Revenue, 97-ALJ-17-0263-CC (April 24,
1998)and Anonymous v. South Carolina Department of Revenue, 97-ALJ-17-0379-CC
(April 24, 1998).
Example #2: The hotel receives $100 from the guest for the golf package. The hotel
pays the restaurant $5 for the guest’s meal. The hotel has an agreement with the golf
course to pay the golf course $30 for the guest's green fee. When a guest does play golf,
the hotel pays the $30; however, the hotel will receive money back from the golf course
at a later date to help pay for the hotel's advertisements of its golf packages.
The hotel would be liable for the 7% tax on $65 ($100 - $35). The golf course would be
liable for the 5% admissions tax on $30 and the restaurant would be liable for the 5%
sales tax on the sale of the meal. The fact that the hotel will receive a portion of the
money back in the future does not affect the taxation of the charges. It is merely an
expense of the golf course that is paid to the hotel.
Notes: 1. To ensure the 7% tax is not circumvented by sending most of the package
charge to the golf course and then later having a large portion of it returned to the hotel
as "advertising," the amount paid to the golf course and returned to the hotel to pay for
advertising must be reasonable and supported by the books and records of both
taxpayers. Otherwise, the Department will assess taxes according to a reasonable
breakdown of room charges, green fees, and meal charges.
- Other tourist packages, such as tennis, honeymoon, and entertainment packages,
handled in a similar manner would be taxed in the manner described above for golf
packages.
BIKE RENTALS - Q.
If a hotel charges $100.00 per night for a room, and the customer has the option to rent
a bike to travel around the resort area for $10.00 a day, what tax rate applies to each of
the charges?
A.
The $100.00 hotel charge is taxed at 7%. The rental of the bike is optional and not part
of the services provided with the room for the $100.00 charge. The $10.00 is not an
additional guest charge since the rental charge for the bike is a sale of tangible personal
property and is otherwise taxed at 5% under Chapter 36.
- Q.
If a hotel charges $100.00 per night for a room, and the hotel allows the guest to
reserve a bike at no extra charge to travel around the resort, what tax rate applies to the
charge?
A.
The $100.00 hotel charge is taxed at 7%. The availability of the bike is a part of the
services provided with the room for the $100.00 charge and is therefore not an
additional guest charge.
7
NEWSPAPERS
- Q.
A.
- Q.
A.
If a hotel charges $80.00 for a room, and the guest receives a newspaper that is
delivered to the guest's door in the morning, what tax rate applies to the charge?
The $80.00 room charge is taxed at 7%. The newspaper is not an additional guest
charge since the newspaper is part of the services provided with the room for the
$80.00 charge.
If a hotel charges $80.00 for a room, and the customer is charged $2.00 for a newspaper
that is delivered at the guest's request, what tax rate applies to each of the charges?
The $80.00 room charge is taxed at 7%, while the charge for the newspaper, as an
additional guest charge, is taxed at 5%. The newspaper that is provided for $2.00 is
over and above the services customarily provided with the room at the hotel.
VALET PARKING
- Q.
A.
If a hotel charges $80.00 for a room, and there is no additional charge to the customer
for valet parking, what tax rate applies to the charge?
The $80.00 room charge is taxed at 7%.
- Q.
If a hotel charges $80.00 for a room, and the customer is also charged $15.00 for valet
parking, what tax rate applies to each of the charges?
A.
The $80.00 room charge is taxed at 7%, while the $15.00 charge for the valet parking,
as an additional guest charge, is taxed at 5%.
- Q.
A.
If a person is not a guest at a hotel, but is attending an event at the hotel, is a $15.00
charge for valet parking subject to the tax as an additional guest charge?
The $15.00 charge for valet parking is not subject to the sales tax. It is not an
additional guest charge since, in order to be taxable, the charge must be in addition to a
room rental charge. This charge is not in addition to another charge.
MEETING ROOMS
- Q.
A.
- Q.
If a hotel charges $80.00 for a guest room, and there is no additional charge to the
customer for the use of a meeting room, what tax rate applies to the charge?
The $80.00 guest room charge is taxed at 7%.
If a hotel charges $80.00 for a guest room, and the customer is also charged $35.00 for
the use of a meeting room, what tax rate applies to each of the charges?
8
A.
The $80.00 guest room charge is taxed at 7%, while the $35.00 charge for the meeting
room, as an additional guest charge, is taxed at 5%.
- Q.
Is a $35.00 charge for the use of the meeting room by a person who is not a guest at the
hotel, subject to the tax as an additional guest charge?
A.
The $35.00 charge for the meeting room is not subject to the sales tax. It is not an
additional guest charge since, in order to be taxable, the charge must be in addition to a
room rental charge. This charge is not in addition to another charge.
Note: If the meeting room is being rented by an organization that is conducting a
seminar, workshop, conference, or similar meeting at the hotel, the charge for the
meeting room is taxed at 5% as an additional guest charge if the organization is also
renting guest rooms at the hotel for officers or members of the organization, invited
speakers, or others.
OTHER SERVICES
- Q.
A.
If a hotel charges $100.00 for a room, and the room contains a refreshment bar so the
guest may avail himself of alcoholic drinks, non-alcoholic drinks, or snacks at no extra
cost, what tax rate applies to the $100.00?
The $100.00 room charge is taxed at 7%.
- Q.
If a hotel charges $80.00 for a room, and the room contains a refreshment bar so the
guest may avail himself of alcoholic drinks, non-alcoholic drinks, or snacks at a set
price per item, what tax rate applies to each of the charges?
A.
The $80.00 room charge is taxed at 7%, while the charges for each item the guest
consumes from the refreshment bar is taxed at a rate of 5% as a sale of tangible
personal property under Code Section 12-36-910. These charges are not additional
guest charges since they are "otherwise taxed" under Chapter 36.
CANCELLATIONS
- Q.
If a person reserves and pays for sleeping accommodations at a hotel, but does not
cancel the reservation or does not cancel the reservation by the prescribed time set by
the hotel, is the charge for the accommodations retained by the hotel subject to the tax
even though he will not use the sleeping accommodations?
A.
While the sleeping accommodations were not used, the person had the right to use such
sleeping accommodations. Therefore, the sleeping accommodations were "furnished"
and the charge by the hotel for such sleeping accommodations is subject to the tax. See
Question #30 for information concerning when accommodations are canceled but an
administrative fee or deposit is charged or retained.
9
30. Q.
A.
If a person makes reservations with a hotel for sleeping accommodations, but the
reservations are canceled by such person or by the hotel, is an administrative fee or
deposit charged or retained by the hotel as a result of the cancellation subject to the
tax?
An administrative fee or deposit retained or charged by a hotel when reservations for
sleeping accommodations are canceled is not subject to the sales tax. See Anonymous
v. South Carolina Department of Revenue, 97-ALJ-17-0263-CC (April 24, 1998)and
Anonymous v. South Carolina Department of Revenue, 97-ALJ-17-0379-CC (April 24,
1998).
Note: See Question #29 for information concerning when accommodations are
canceled or otherwise not used but a charge for the sleeping accommodations is made
or retained by the hotel. See also Question #16, Example #1 Note, for the taxation of a
tourist package when sleeping accommodations are furnished but the guest does not use
a portion of the package (i.e. the guest pays for a golf package but does not play golf).
Note: This document references tax rates of 7% for the sales tax on accommodations, 5% for the
sales tax on additional guest charges, and 5% for the sales tax on sales or rentals of tangible
personal property. Counties may now impose several types of local option sales and use taxes as
well as other local taxes imposed upon the furnishing of accommodations and the sale of
prepared meals. Some of these taxes are collected by the Department of Revenue on behalf of
the county imposing the tax and others are collected by the county itself. For information
concerning these local taxes, see SC Revenue Ruling #91-17, SC Revenue Ruling #97-20, and
SC Revenue Ruling #96-9. To obtain copies of these rulings or future rulings on local taxes,
taxpayers may visit the department’s website at http://www.dor.state.sc.us.
SOUTH CAROLINA DEPARTMENT OF REVENUE
s/Burnet R. Maybank III
Burnet R. Maybank, III, Director
Columbia, South Carolina
October 21
, 1998
10
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