When a company contracts for blocks of hotel rooms for its employees, how does Tennessee's 90-day continuous-occupancy exemption work — does it matter which employees or which rooms, and how does the hotel get the tax back?

Plain-English summary

Tennessee charges sales tax on hotel rooms, but there's a long-stay break: the tax does not apply to "rooms, lodgings, or accommodations supplied to the same person for a period of ninety (90) continuous days or more" (Tenn. Code Ann. § 67-6-205(c)(1)). A group of related hotels contracted with a corporate customer to house its employees in blocks of rooms, billed weekly. The hotels asked how the 90-day exemption applies when the people change, the specific rooms change, and the number of rooms rented goes up and down. The Department answered five questions:

1. Different employees, same hotel — still continuous (Ruling 1). Occupancy by changing employees counts toward continuous occupancy so long as the rooms are in the same hotel. You cannot add together rooms across separate hotel locations to reach 90 days.
2. Same rooms not required (Ruling 2). Employees don't need to stay in the same rooms each night. The renting "person" is the customer corporation, not the individual employees (§ 67-6-102(61) defines "person" to include a corporation), so it doesn't matter who sleeps where — only that the customer kept a given number of rooms occupied at that hotel for 90 continuous days. (A 1977 Tennessee court reached the same result for a block of rooms where the hotel chose room assignments.)
3. Fluctuating room counts — use the nightly minimum (Ruling 3). When the number of rooms varies, the hotel must track occupancy nightly, and the fewest rooms occupied during a given 90-day window is the continuous-occupancy count for that window. Multiple overlapping 90-day windows can run at the same time (e.g., a baseline block hits 90 days, and additional rooms later form their own 90-day block).
4. Refund or credit after 90 days (Ruling 4). Once 90 days is reached, the hotel must first credit the customer for tax collected on the now-exempt rooms, and then may either claim a credit on a later return or file a refund claim (§ 67-1-1802; Tenn. Comp. R. & Regs. 1320-5-1-.70(2)). A refund claim must be filed within three years from December 31 of the year of payment.
5. No early exception (Ruling 5). There is no exception for the first 89 days. The hotel must collect and remit tax on the rooms until the 90-day mark is actually reached; failing to do so exposes it to civil and possibly criminal penalties.

The practical heart of the ruling is tracking: because the count resets to the nightly minimum and 90-day windows can overlap, hotels have to keep careful per-location, per-night records (dealers must retain records for three years, § 67-6-523(b)). The ruling includes a worked example: if a customer holds at least 20 rooms for Days 1-90, on Day 90 the hotel can refund/credit the tax on those 20 rooms and stop taxing them; if the customer then holds 30 rooms for Days 11-101, on Day 101 the extra 10 rooms reach their own 90-day mark. A drop below a block (a cancellation) breaks continuity for the rooms below the new count.

What this means for you

Hotels, motels, and extended-stay / corporate-housing operators

The 90-day exemption is per hotel and per "person," measured by the minimum number of rooms a customer continuously occupies — not by which guests or which specific rooms. Don't let staff turnover or room reassignment scare you off the exemption, but don't aggregate across properties, and build tracking that handles overlapping 90-day windows and cancellations. Until a block actually hits 90 days, keep collecting and remitting tax; only afterward do you credit the customer and recover the tax by credit or refund.

Companies booking long-term blocks of rooms for staff

If your company keeps a steady block of rooms at one hotel for 90+ continuous days, those rooms become exempt even though different employees rotate through them. The hotel is supposed to credit you for the tax once the threshold is met. Keep your own occupancy records to support the claim.

Accountants and tax professionals

The mechanics: the renting "person" is the entity, not the occupant (§ 67-6-102(61)); continuity isn't broken by room reassignment within one hotel; the continuous-occupancy figure is the nightly minimum across each 90-day window (overlapping windows allowed); recovery is via credit or a § 67-1-1802 refund within three years; and Rule 1320-5-1-.70(2) authorizes the dealer's refund/credit. Records must be kept three years (§ 67-6-523(b)). There is no pre-90-day suspension of the collection duty.

Common questions

Q: When are hotel rooms exempt from Tennessee sales tax?
A: When rooms, lodgings, or accommodations are supplied to the same person for 90 or more continuous days at the same hotel (Tenn. Code Ann. § 67-6-205(c)(1)).

Q: Does it matter that different employees use the rooms, or that they switch rooms?
A: No. The customer (a corporation) is the "person" renting, so changing employees doesn't matter, and continuity isn't broken by assigning different rooms within the same hotel. You just can't combine rooms across different hotel locations.

Q: How do you count continuous occupancy when the number of rooms changes?
A: Track it nightly; the fewest rooms occupied during a 90-day window is the continuous-occupancy count for that window. Several overlapping 90-day windows can run at once, and a cancellation that drops the count breaks continuity for the rooms below it.

Q: How does the hotel get the tax back, and is anything exempt during the first 90 days?
A: After 90 days the hotel must first credit the customer, then claim a credit on a later return or file a refund under § 67-1-1802 (within three years). Nothing is exempt during the first 89 days — the hotel must collect and remit until the 90-day mark or risk penalties.

Q: Can I rely on this letter ruling?
A: No. A Tennessee letter ruling binds the Department only as to the specific taxpayer and facts and can be revoked or modified. Confirm your own situation with a tax professional.

Citations and references

Tennessee statutes and rules (Tenn. Code Ann.; Retailers' Sales Tax Act, §§ 67-6-101 to -907):

• § 67-6-205(c)(1) (sales tax on hotel/lodging accommodations; exemption for the same person for 90 continuous days or more)
• § 67-6-102(61) (definition of "person," including a corporation)
• § 67-6-523(b) (dealer recordkeeping — 3 years from Dec. 31 of the filing year)
• § 67-1-1802 (refund-claim procedure; § 67-1-1802(a)(1)(A) — 3-year limit from Dec. 31 of the year of payment); Tenn. Comp. R. & Regs. 1320-5-1-.70(2) (dealer refund/credit after 90 continuous days)

Case cited by the ruling:

• Nashville Hotel Co. v. Woods, No. B-17248 (Davidson Cnty. Cir. Ct. June 1, 1977) (90-day continuous occupancy not broken where a business contracts for a block of rooms but the hotel assigns the specific rooms; decided under the predecessor statute, former Tenn. Code Ann. § 67-3002(c)(4)(1) (1976))

Subject

The application of Tenn. Code Ann. § 67-6-205(c)(1) (Supp. 2012) to hotel rooms continuously occupied for ninety days or more

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/13-07.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 13-07
Letter rulings are binding on the Department only with respect to the individual taxpayer
being addressed in the ruling. This ruling is based on the particular facts and
circumstances presented, and is an interpretation of the law at a specific point in time. The
law may have changed since this ruling was issued, possibly rendering it obsolete. The
presentation of this ruling in a redacted form is provided solely for informational purposes,
and is not intended as a statement of Departmental policy. Taxpayers should consult with a
tax professional before relying on any aspect of this ruling.
SUBJECT
The application of TENN. CODE ANN. § 67-6-205(c)(1) (Supp. 2012) to hotel rooms continuously
occupied for ninety days or more.
SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon
the Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation
or modification shall be effective retroactively unless the following conditions are met, in which
case the revocation shall be prospective only:
(A) The taxpayer must not have misstated or omitted material facts involved in
the transaction;
(B) Facts that develop later must not be materially different from the facts upon
which the ruling was based;
(C) The applicable law must not have been changed or amended;
(D) The ruling must have been issued originally with respect to a prospective or
proposed transaction; and
(E) The taxpayer directly involved must have acted in good faith in relying upon
the ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.
FACTS
[HOTEL ENTITIES] (collectively, the “Taxpayer”) share the same majority shareholder and
general manager. The Taxpayer entered into a contract with [CUSTOMER] (the “Customer”) for
the provision of hotel rooms to the Customer’s employees. Pursuant to this contract, the
Taxpayer provides rooms at a discounted rate at any of the Taxpayer’s locations. The Taxpayer
invoices the Customer on a weekly basis for the number of rooms furnished.

1

At two of the Taxpayer’s locations, the occupancy by the Customer’s employees remains fairly
consistent with respect to the number of hotel rooms utilized each night. At the third location, the
utilization of hotel rooms by Customer’s employees fluctuates based on demand and availability.
RULINGS

1. Does the occupancy of the Taxpayer’s hotel rooms in a single hotel by differing Customer
   employees establish continuous occupancy for purposes of the exemption under TENN. CODE
   ANN. § 67-6-205(c)(1) (Supp. 2012)?
   Ruling: Yes, provided that the hotel rooms are in the same hotel. Taxpayers may not
   aggregate rooms across separate hotel locations.
2. Do the Customer’s employees need to occupy the same hotel rooms every night to establish
   continuous occupancy for purposes of TENN. CODE ANN. § 67-6-205(c)(1) (Supp. 2012)?
   Ruling: No, the Customer’s employees do not need to occupy the same hotel rooms every
   night to establish continuous occupancy. The Taxpayer must only establish that the Customer
   occupied a certain number of hotel rooms, in that hotel, for ninety continuous days.
3. How is continuous occupancy determined for purposes of TENN. CODE ANN. § 67-6205(c)(1) (Supp. 2012) when the number of hotel rooms rented by the Customer fluctuates
   from night to night?
   Ruling: Since the Customer occupies a different number of hotel rooms each night, the
   Taxpayer must track the Customer’s occupancy rate on a nightly basis at that hotel. The night
   that the Customer occupies the fewest number of hotel rooms at that particular hotel in any
   given ninety-day period represents the continuous occupancy rate for that period. Note that
   there may be multiple ninety-day periods being tracked simultaneously.
4. Once continuous occupancy has been established at a hotel for purposes of TENN. CODE ANN.
   § 67-6-205(c)(1) (Supp. 2012), may the Taxpayer apply for a refund of Tennessee sales tax
   collected and remitted under TENN. CODE ANN. § 67-6-205(c)(1)?
   Ruling: Yes. The Taxpayer may apply for a refund of Tennessee sales tax collected and
   remitted with respect to the rental of hotel rooms that are continuously occupied for ninety
   days or more. The Taxpayer must first credit the Customer for any sales tax collected and
   remitted on rooms to which the sales tax ultimately does not apply. The Taxpayer may then
   apply for a refund or claim a credit for that amount on a subsequent Tennessee sales and use
   tax return.
5. Are there any exceptions to the requirement that the Taxpayer collect and remit Tennessee
   sales tax under TENN. CODE ANN. § 67-6-205(c)(1) (Supp. 2012) during the first ninety days
   of occupancy?
   Ruling: No. Until the ninety-day continuous occupancy requirement is met, the Taxpayer
   must collect and remit Tennessee sales tax with respect to the rental of its hotel rooms.

2

ANALYSIS
Under the Retailers’ Sales Tax Act,1 the retail sale in Tennessee of tangible personal property
and specifically enumerated services and items is subject to the sales and use tax.
The rental of hotel rooms is one transaction specifically enumerated as subject to the Tennessee
sales tax. TENN. CODE ANN. § 67-6-205(c)(1) (Supp. 2012) imposes the sales tax on the “sale,
rental or charges for any rooms, lodgings, or accommodations furnished to persons by any hotel,
inn, tourist court, tourist camp, tourist cabin, motel, or any place in which rooms, lodgings or
accommodations are furnished to persons for a consideration.” The sales tax does not apply,
however, “to rooms, lodgings, or accommodations supplied to the same person for a period of
ninety (90) continuous days or more.”2
Thus the Taxpayer’s Customer will be exempt from sales tax on the rental of hotel rooms if such
rental is 1) of rooms, lodgings, or accommodations; 2) the Customer and/or its employees qualify
as being the “same person”; and 3) there is a period of ninety days continuous occupancy or
more. The Taxpayer’s hotel rooms clearly qualify as rooms, lodgings, or accommodations, so
only the second and third requirement merit further discussion, in addition to the process for
returning already collected sales taxes to the Taxpayer and its Customer.

1. CUSTOMER’S EMPLOYEES & DEFINITION OF “PERSON”
   The same Customer employees need not occupy the hotel rooms for the entire ninety days in
   order to qualify for the sales tax exemption because it is the Customer, not the employees,
   renting the hotel rooms.
   As stated above, the sales tax does not apply “to rooms, lodgings, or accommodations supplied to
   the same person for a period of ninety (90) continuous days or more.”3 TENN. CODE ANN. § 676-102(61) (Supp. 2012) defines “[p]erson” in pertinent part as “any individual, firm, copartnership, joint venture, association, [or] corporation.”
   The Customer is a corporation, and consequently comes within the TENN. CODE ANN. § 67-6102(61) definition of “person.” The Customer, not its employees, is renting the rooms so the
   Customer is the relevant person for purposes of TENN. CODE ANN. § 67-6-205(c)(1), rendering it
   irrelevant whether different employees of the Customer utilize the rooms during the ninety days.
2. CONTINUOUS OCCUPANCY & VARYING ROOMS AT THE SAME HOTEL
   The Customer’s employees do not have to occupy the same hotel rooms every night to establish
   continuous occupancy, but the hotel rooms must be located in the same hotel.

1

Tennessee Retailers’ Sales Tax Act, ch. 3, §§ 1-18, 1947 Tenn. Pub. Acts 22, 22-54 (codified as amended at TENN.
CODE ANN. §§ 67-6-101 to -907 (2011 & Supp. 2012)).
2

TENN. CODE ANN. § 67-6-205(c)(1) (Supp. 2012).

3

Id. (emphasis added).

3

As stated above, the sales tax does not apply to “rooms, lodgings, or accommodations supplied to
the same person for a period of ninety (90) continuous days or more.”4 Although the statute is
silent as to whether it requires the same rooms to be rented, at least one Tennessee court has held
that the ninety-day continuous occupancy is not broken where a business entity contracts for a
block of rooms but the hotel retains the right to assign which rooms the entity’s employees stay
in.5
Furthermore, it would be overly burdensome to require taxpayers to account not only for the
number of rooms occupied by their business customers, but also the specific rooms the
customers’ employees occupied. It would also create an administrative burden for the
Department to track the specific rooms rented by such employees when the taxpayer files for a
credit on a subsequent return or requests a refund pursuant to TENN. CODE ANN. § 67-1-1802
(2011).
Thus, as a matter of both law and policy, continuous occupancy is not defeated if the Customer’s
employees are assigned different rooms in the same hotel during the ninety-day period.6

3. DETERMINATION OF CONTINUOUS OCCUPANCY IN A SINGLE HOTEL
   Continuous occupancy is determined by the minimum number of hotel rooms rented by the
   Customer in any given hotel location for a ninety-day period.
   As a consequence of the sales tax applying until the ninetieth day of continuous occupancy, the
   Taxpayer must collect and remit sales tax on all rented hotel rooms for the first eighty-nine days
   of occupancy. The Taxpayer must track the number of rooms rented by the Customer in each
   hotel location separately and on an ongoing basis.7 Fluctuations in the number of rented rooms,
   such as cancellations or the rental of additional rooms, affect the ninety-day continuous
   occupancy rate. As seen immediately below, it is imperative to thoroughly track the number of
   4

Id.

5

See Order at 1-2, Nashville Hotel Co. v. Woods, No. B-17248 (Davidson Cnty. Cir. Ct. June 1, 1977) (holding that
the taxpayer business entity was due a refund of sales taxes paid in protest for room rentals exceeding ninety days,
despite the hotel’s ability to assign which rooms the entity’s employees would stay in); compare TENN. CODE ANN.
§ 67-3002(c)(4)(1) (1976) (relied upon by the Nashville Hotel Company court and containing a similar ninety-day
continuous occupancy requirement), with TENN. CODE ANN. § 67-6-205(c)(1) (Supp. 2012) (current ninety-day
continuous occupancy requirement).
6

Accounting for each hotel location separately is consistent with how Taxpayers are required to file their Tennessee
sales and use tax returns.

7

The Taxpayer must retain such records pursuant to TENN. CODE ANN. § 67-6-523(b), which provides that every
dealer
shall secure, maintain, and keep for a period of three (3) years from December 31 of the year in
which the associated return required by this chapter was filed a complete record of tangible
personal property received, used, sold at retail, distributed or stored, leased, or rented within this
state by the dealer, together with invoices, bills of lading, and other pertinent records and papers as
may be required by the commissioner for the reasonable administration of [the sales and use tax
laws].

4

rooms rented given the potential for overlapping ninety-day periods or a break in the chain of
continuity due to cancellations.
Take the following as an example: A customer rents at least twenty hotel rooms for ninety
continuous days (Days 1-90). The customer rented the fewest number of hotel rooms (twenty
rooms) on Day 10 of the ninety-day period. On Day 90, the hotel can refund the customer for
sales tax collected and remitted on the twenty rooms and may either claim a credit or file a claim
for refund. Furthermore, after the ninety-day period, the hotel no longer needs to collect and
remit sales tax on the twenty rooms, assuming the customer maintains continuous occupancy.
Continuing with the hypothetical, after Day 10 (wherein the customer rented only twenty rooms),
the customer continuously occupied at least thirty rooms for ninety continuous days (Days 11101). Thus on Day 101, the hotel can refund the customer for sales tax collected and remitted on
the additional ten continuously occupied rooms on Day 101. The hotel may then claim a credit or
file a claim for refund on those ten additional continuously occupied rooms for the second,
overlapping ninety-day period. In addition, although sales tax is collected and remitted during
the initial ninety-day period for a block of rooms, once a block of rooms has reached the ninety
day requirement, the hotel need not collect sales tax on those same rooms, unless and until there
is a cancellation that reduces the number of rented rooms below the number of rooms in the
block.8

4. REFUND OR CREDIT OF SALES TAX PAID
   The Taxpayer may claim a credit on a future sales tax return or apply for a refund for Tennessee
   sales tax collected and remitted with respect to the rental of hotel rooms that are continuously
   occupied for ninety days or more. The Taxpayer must first credit the Customer for any sales tax
   collected and remitted on rooms to which the sales tax ultimately does not apply. The Taxpayer
   may then apply for a refund or claim a credit for that amount on a subsequent Tennessee sales
   and use tax return.
   As stated above, TENN. CODE ANN. § 67-6-205(c)(1) specifically exempts from sales tax any
   hotel rooms continuously occupied by the same person for ninety continuous days. TENN. COMP.
   R. & REGS. 1320-5-1-.70(2) (2008) further clarifies this exemption:
   After a transient has occupied a room or other accommodation for ninety (90)
   continuous days or more the dealer furnishing the room or other accommodations
   may refund any Sales Tax which he has actually collected from the person, and
   claim credit for that tax on a subsequent return filed with the Department.
   Thus the Taxpayer has two options regarding sales tax collected and remitted on rooms to which
   the sales tax ultimately does not apply after refunding or crediting the Customer with the tax
   previously collected.9 First, the Taxpayer may claim a credit for the amount collected and
   remitted on a subsequent tax return; or second, the Taxpayer may file a claim for refund pursuant
   8

See infra, Appendix 1.

9

See TENN. CODE ANN. § 67-1-1802(a)(1)(A) (2011).

5

to TENN. CODE ANN. § 67-1-1802 (2011) for the amount collected from the Customer. Such
claim must be filed “within three (3) years from December 31 of the year in which the payment
was made.10

5. EXCEPTIONS TO THE SALES TAX COLLECTION REQUIREMENT
   Until the ninety-day continuous occupancy requirement is met, the Taxpayer must collect and
   remit Tennessee sales tax with respect to the rental of its hotel rooms. There are no exceptions to
   the sales tax collection requirement imposed by TENN. CODE ANN. § 67-6-205(c)(1) for the first
   eighty-nine days of continuous occupancy of a hotel room.
   TENN. CODE ANN. § 67-6-205(c)(1) provides the only exception to the imposition of the sales tax
   for renting hotel rooms, but as explained above, it only applies after ninety days of continuous
   occupancy. There is no statute or regulation that authorizes a suspension of the sales tax
   collection obligation before the ninety days is reached. The failure to collect and remit sales tax
   during the initial eighty nine day period will subject the Taxpayer to civil and possibly criminal
   penalties.

R. John Grubb II
Senior Tax Counsel

10

APPROVED:

Richard H. Roberts
Commissioner of Revenue

DATE:

June 26, 2013

Id.
6

Appendix 1:

Hotel 1
40

35

30

25

20

15

10

5

1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
51
53
55
57
59
61
63
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99

0
No Tax Collected

Vertical Axis: Quantity of rooms rented
Horizontal Axis: Count of continuous rental days

Eligible Days 1‐89

Eligible Days 11‐100

7

Ineligible Occupancy