Was a Virginia resort's lump-sum corporate membership fee subject to sales tax?

Plain-English summary

Virginia ruled that the entire three-year corporate membership fee was subject to retail sales tax. Each membership covered four individuals and included lodging, unlimited golf, golf-cart use, guest golf, merchandise and recreation discounts, and tickets with lodging and food for an out-of-state golf tournament.

The package included taxable Virginia lodging and accommodations and the taxable rental of golf carts. Under the Department's bundled-package rulings, a hotel or resort that charges one amount for accommodations plus other services or tangible property must tax the full charge.

The resort could not wait until members used individual benefits or allocate the membership price among lodging, golf, discounts, and other items. It had to apply tax when the full membership charge was billed, report the sale in that month's return, and remit the tax with that return.

What this means for you

• A single resort or hotel package that includes taxable accommodations can make the entire bundled price taxable.
• Including tangible personal property such as golf-cart use independently reinforces the taxable treatment.
• Billing structure matters: the ruling addressed one lump-sum membership fee, not separately priced components.
• Configure invoicing and sales-tax reporting to recognize the full charge in the month billed.

Common questions

Q: Was only the lodging portion taxable?
A: No. Virginia required tax on the entire lump-sum corporate membership charge.

Q: Did unlimited golf or discounts receive a separate allocation?
A: No allocation was permitted for the single bundled charge described in the ruling.

Q: When did the resort report the sale?
A: In the month the membership charge was billed to the customer.

Q: Did the three-year term delay the tax?
A: No. The tax applied to the full amount when billed, rather than as benefits were later used.

Citations and references

• Va. Code §§ 58.1-602 and 58.1-603 4.
• Virginia Public Documents 95-17 and 12-67, discussed for lump-sum accommodation packages.

Subject

The tax liability on the sale of corporate memberships to resort

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-205

Original ruling text

November 7, 2013

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This will reply to your request for a ruling on the application of the retail sales and use tax to sales of corporate memberships by your client, * (the "Taxpayer"). I apologize for the delay in this responding to your letter.

FACTS

The Taxpayer is a Virginia resort that offers lodging, dining, golf and other recreational activities to its customers. The Taxpayer proposes to sell corporate memberships that are valid for a three-year period. Each corporate membership will include four individual members and will entitle those members to lodging, unlimited golf, the use of golf carts, additional rounds of golf for guests, merchandise discounts and discounts on recreational activities purchased from the Taxpayer. The membership will also include tickets to a golf tournament in another state with free lodging and food provided. The Taxpayer seeks guidance regarding the sales and use tax treatment of the corporate membership fees, the benefits provided with the corporate memberships and the point at which the benefits are taxed.

RULING

Virginia Code § 58.1-603 4 imposes the retail sales tax on "the gross proceeds derived from the sale or charges for rooms, lodgings or accommodations furnished to transients as set out in the definition of ‘retail sale’ in § 58.1-602." Virginia Code § 58.1­602 defines "retail sale," in part, as follows:

The terms "retail sale" and a "sale at retail" shall specifically include the following: (i) the sale or charges for any room or rooms, lodgings, or accommodations furnished to transients for less than 90 continuous days by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for a consideration....

Based on the definition of retail sale and the provisions of Va. Code § 58.1-603 4, the Taxpayer is required to charge the tax on the gross proceeds received for the rental of rooms and accommodations to its customers. The Taxpayer's charge for the proposed corporate memberships includes the provision of lodging and accommodations, which are subject to the tax. In addition, the membership charge includes the use of golf carts by members, which constitutes a taxable rental of tangible personal property.

The Tax Commissioner has previously ruled in Public Document (P.D.) 95-17 (2/2/95) that packages offered by hotels, motels, inns, etc., that include a single charge for accommodations and other services or tangible personal property are subject to the tax on the total charge for the package. In P.D. 95-17, a hotel offered a "gold package" to customers that included a hotel room, breakfast, a round of golf and a complimentary tee gift. The hotel did not charge guests sales tax on the golf green fee portion of the package. However, the Department ruled that the entire charge, including the green fee charge, was subject to the tax based on the definitions of "sales price" and "gross proceeds" in Va. Code § 58.1-602.

More recently, the Department issued P.D. 12-67 (5/2/12), which addresses the sale of various accommodation packages that include lodging, meals, attractions and golf green fees. In this determination letter, the lump sum charges billed for the sale of these packages were deemed to be fully taxable.

Based on the cited authorities and the facts presented, the lump sum charges billed by the Taxpayer for the corporate memberships are subject to the retail sales tax on the full amount of the charge. The tax should be applied to the full amount of the membership charge when it is billed to the customer. The Taxpayer should report the sale amounts for the corporate memberships in the month the charges are billed to customers and the sales tax should be remitted with the Taxpayer's sales and use tax return filed for the month that the sale is billed.

This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections and public documents cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions concerning this response, please contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5140203517.S