Does Utah sales tax apply to charges hotels and motels bill guests for in-room pay-per-view movies and video games?

Plain-English summary

This 1996 advisory opinion answers a question that came up during hotel and motel sales-tax audits: are charges for in-room movies and video games subject to Utah sales tax? The answer turns entirely on how the movie gets to the TV, not on the fact that it's a hotel charging for entertainment.

The Commission described two setups. In the first, the hotel itself controls the equipment: it rents a selection of videos, keeps a video machine in a specified place, and a hotel employee loads the requested video and broadcasts it to the guest's room on request. The Commission said this is no different from renting a video from a video store — it's a taxable rental of tangible personal property, regardless of whether the video machine physically sits in the guest's room or elsewhere in the hotel.

In the second setup, a vendor (identified only as "XXXXX" in the redacted text) installs equipment in the hotel that lets it broadcast a movie or video game to guests using technology that accesses the content through cable or satellite. Because the Commission had already advised cable and satellite companies that similar charges to their own customers were not taxable — a position held pending the outcome of a telecommunications study — it extended that same non-taxable treatment to hotels using this cable/satellite-access delivery method.

The opinion also flags that it clarifies and departs from the Commission's own "Tourist Facilities" publication, which had stated flatly that in-room movie charges are taxable; the Commission said that guidance hadn't anticipated newer delivery technology. On past collections, the ruling instructs that if a hotel had already collected sales tax on what turns out to be a tax-exempt video service, that tax must still be remitted to the Commission, and any customer who wants a refund of it follows the Commission's usual refund procedure. A companion internal memo attached to the opinion also raises — without the Commission's answer being part of this document — a question about whether the opinion's "prospective application" runs from when it was signed for the original requester or from when it was later signed for this recipient.

What this means for you

Hotels and motels

Whether you owe sales tax on in-room movie/video-game charges depends on your delivery system, not on the fact that you're charging guests for entertainment. If you (or your staff) physically control a video player and broadcast a rented video to a guest's room on request, that charge is taxable, just like a video-store rental. If a third-party vendor's equipment delivers the content to guests via cable or satellite access technology, the Commission treated that as not taxable at the time of this ruling — but note that treatment was explicitly pending a telecommunications study, so it could have changed since 1996. If you've been collecting tax on charges that turn out to be exempt under this reasoning, this ruling says you must still remit whatever you've already collected to the Commission.

Cable/satellite technology vendors serving hotels

The Commission's non-taxable treatment of hotel in-room movies delivered this way rested on parity with how it was already treating similar charges billed directly by cable and satellite companies to their own customers. If you supply this kind of equipment to hospitality clients, know that the underlying rationale was tied to a telecommunications study that was still pending when this opinion issued — current treatment should be verified against later, current Commission guidance rather than assumed from this 1996 letter.

Accountants and tax professionals advising hospitality clients

When reviewing a hotel or motel's sales-tax treatment of in-room entertainment charges, ask specifically how the video or game reaches the guest: hotel-controlled equipment broadcasting a rented video is treated as a taxable rental of tangible personal property; cable/satellite-access delivery was treated as exempt as of this 1996 opinion. Because this ruling predates the resolution of the telecommunications study it references, and Utah's sales tax statutes and rules have been renumbered and amended repeatedly since 1996, confirm current law before advising a client based on this document alone.

Common questions

Q: Does Utah tax hotel charges for in-room pay-per-view movies?
A: It depends on delivery. Under this 1996 opinion, if the hotel controls the video equipment and broadcasts a rented video to the room, the charge is taxable as a rental of tangible personal property. If the movie or video game reaches the guest via cable/satellite access technology installed by a vendor, the Commission treated the charge as not taxable, consistent with its treatment of cable and satellite companies' own charges.

Q: Why would the same kind of charge be taxable in one case and not the other?
A: The Commission drew the line at who controls the delivery mechanism and how the content is transmitted. Hotel-controlled video-machine rentals were treated the same as renting a video from a video store (taxable tangible personal property). Cable/satellite-access delivery was treated the same as the Commission's existing (at the time, still-pending) approach to cable and satellite company billing.

Q: We already collected sales tax on in-room movie charges that turn out to be exempt. What do we do?
A: The opinion states that if a hotel or motel already collected sales tax on tax-exempt video services, that tax must still be remitted to the Tax Commission. If an individual customer wants a refund of tax they were charged, the Commission's usual refund procedure applies.

Q: Is the "not taxable" treatment for cable/satellite-delivered in-room movies permanent?
A: Not necessarily. The opinion says the Commission's position on cable and satellite charges — and, by extension, this hotel scenario — was pending the outcome of a telecommunications study at the time. This is a 1996 ruling, so that study's outcome and any resulting law changes should be checked separately; do not assume the 1996 treatment still applies today without verifying current guidance.

Q: Can my hotel rely on this exact ruling for our own tax position?
A: Not directly. This is an advisory opinion issued to a specific requester based on the facts presented, and it binds the Commission only as to that taxpayer and those facts. It's useful as a guide to how the Commission reasons about delivery-method distinctions, but you should confirm your own facts and current law with the Commission or a Utah tax professional.

Citations and references

No specific Utah Code sections or administrative rules are cited by number in this advisory opinion. The Commission's reasoning instead relies on (1) analogy to the taxation of tangible personal property rentals (comparing hotel-controlled video playback to renting a video from a video store), (2) its existing, contemporaneous treatment of cable and satellite company charges as not taxable pending a telecommunications study, and (3) its own "Tourist Facilities" publication, which the opinion clarifies/corrects as to in-room movie charges.

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/96-048.htm

Original ruling text

96-048

Response
March 8, 1996

Request

DATE:
February 27,1996

RE: Advisory Opinion on in-room movies

I
talked to XXXXX about the advisory opinion XXXXX wrote regarding sales tax on
in-room movies and video games. The
only concern XXXXX had with the opinion as written was that the last sentence
indicates the Commission's clarification will have prospective application. Does prospective application mean from the
date XXXXX signs this advisory opinion or from the date she signed the opinion
for XXXXX?

We
have had audits where the taxpayers have paid an assessment on this issue and
there are many hotels and motels that have been collecting tax for in-room
movies. We currently have a case in
appeals with this very issue. What
impact will this advisory opinion have on the case currently in appeals or
those who have paid audit assessments on this issue?

XXXXX
agrees that the Commission's position is correct as stated in the advisory
opinion. The problem is with the
prospective application. XXXXX said he
has talked to XXXXX about this concern and he thought she was going to discuss
it with the Commission.

Let
me know if you need any more information.

XXXXX

Deputy
Director, Auditing Division

State
Tax Commission

RE:
Advisory Opinion Sales tax on in-room movies and video games

Dear
XXXXX,

This
advisory opinion is in response to your question regarding the application of
sales tax to charges by hotels and similar facilities for in-room movies and
videos. Your question was prompted by
our recent opinion to XXXXX. That
opinion appears to represent a departure from our past instructions to hotel
and motel proprietors. This opinion
clarifies our position on the issue.

Hotels
and motels may provide a variety of television options to their guests. For instance, many hotels and motels provide
satellite or cable t.v. to guests.
Generally the cable charge in included in the room charge. A hotel may
also provide videos for in-room viewing.
Whether the charge for in-room movies is taxable turns on the manner in
which it is delivered.

Some
hotels or motels use a system in which the main video machine is located in a
specified place and under control of the proprietor. The hotel rents a selection of videos for a given amount of time. A guest may request that one of those videos
be broadcast to the t.v. in the guest's room.
A hotel employee places the video in a machine and directs the broadcast
of that video to the guest's room. This
transaction is no different from a transaction in which a customer rents a
video from a video store. Whether the
video is placed in a video machine in the customer's room or elsewhere in the
hotel, the transaction is taxable as a rental of tangible personal property.

XXXXX
and some like types of businesses presented us with a different scenario. XXXXX installs equipment in the hotel that
allows the hotel to broadcast a movie or video game to its guests using
technology that accesses the video from cable or satellite. We have advised cable and satellite
companies that similar charges to their customers are not taxable (pending the
outcome of the telecommunications study).
On that basis, we advised XXXXX that charges for in-room videos
delivered in this manner were not taxable.

Thank
you for bringing to our attention a statement in our Tourist Facilities
publication that requires clarification.
That publication states that charges for in-room movies are subject to
sales tax. We believe that the
publication didn't anticipate the changes in technology that allow different
access to videos. We will clarify this
issue with the Hotel and Motel Association and the Convention and visitor's
Bureau. With regard to sales tax
collected so far, we find as follows:

If
a hotel or motel proprietor has collected sales tax on tax exempt video
services, the tax must be remitted to the Tax Commission. If a particular customer requests a refund
of that tax, the usual refund procedure applies.

For
the Commission,

Alice
Shearer

Commissioner