Did a Virginia historic venue owe sales tax on space rented for weddings and other events?

Plain-English summary

Virginia ruled that the historic plantation's charges for weddings, graduations, and similar events were subject to retail sales tax. The key fact was that the business regularly furnished rooms and accommodations to transients. Its facility rentals therefore fell within the statutory definition of retail sale.

All three requested scenarios were taxable:

• indoor and outdoor space was taxable whether or not tables, chairs, or linens were supplied;
• a package adding food and beverages was taxable on the entire invoice; and
• a charge allowing a customer's caterer to use the on-site kitchen was taxable even though the venue supplied no food or beverages.

The Department distinguished venues that do not regularly rent rooms or accommodations to transients. Under the policy described in the ruling, those businesses could have a narrower rule under which facility charges became taxable when food and beverages were included. That distinction did not help this taxpayer because regular transient rentals were part of its business.

What this means for you

• An event venue can owe sales tax on the space itself when it regularly furnishes accommodations to transients.
• Removing tables, linens, food, or beverages from the package did not make this venue's room and space charges exempt.
• Separately stated kitchen access remained taxable on these facts.
• Document how frequently and in what manner the venue rents rooms, lodging, facilities, or other space; regular transient activity drove the result.

Common questions

Q: Were the grounds and building taxable only because tables and chairs were included?
A: No. The rental charge was taxable regardless of whether tangible personal property came with the space.

Q: Was the full food-and-venue package taxable?
A: Yes. The taxpayer's practice of charging tax on the entire invoice was correct.

Q: Was use of the kitchen taxable when the customer hired the caterer?
A: Yes. The separate kitchen-facility charge was treated as a taxable accommodation rental.

Q: Do all occasional event-space rentals receive the same treatment?
A: Not necessarily. The Department emphasized that this taxpayer regularly rented rooms and accommodations to transients.

Citations and references

• Va. Code §§ 58.1-602 and 58.1-603 4.
• Virginia Public Documents 04-208 and 95-158, discussed in the ruling.

Subject

Tax on plantation and building rented out for weddings, and various events.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-212

Original ruling text

November 14, 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 charges by * (the "Taxpayer") for the rental of certain real property facilities. I apologize for the delay in this response.

FACTS

The Taxpayer owns a historic plantation and building that is rented out for weddings, graduations and various events. The Taxpayer requests a ruling on the sales and use tax treatment of charges billed for three types of rental transactions to its customers.

RULING

Virginia Code § 58.1-603 4 imposes the 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 § 58.1-602 defines "retail sale" as "the sale or charges for any rooms, lodgings, or accommodations furnished to transients for less than 90 continuous days by any hotel, motel, inn, ... or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for a consideration." "Gross proceeds" is defined, in part, by Va. Code § 58.1-602 as "the charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services ...."

Based on the Department's review of the Taxpayer's business activities, the Taxpayer is regularly engaged in renting rooms and accommodations to transients. As such, the charges billed to customers by the Taxpayer for the rental of rooms, accommodations and facilities are retail sales in accordance with the definition of "retail sale" in Va. Code § 58.1-602. These charges are subject to the retail sales tax. Accordingly, the Taxpayer is required to collect and remit the sales tax based on the gross proceeds received from the rental of rooms, accommodations or other spaces for weddings, graduations and other similar events.

The Taxpayer cites three public documents issued by the Department that are applicable to its situation. However, the taxpayers discussed in these documents were not in the business of renting rooms and accommodations to transients on a regular basis. Public Document (P.D.) 04-208 (11/30/04) is more on point with the Taxpayer's business activities. This ruling addresses a taxpayer that rented meeting facilities and a performance hall to the general public, nonprofit organizations and other entities. The taxpayer in this ruling was in the business of renting rooms to transients on a regular basis. For this reason, the charges billed for the rental of meeting facilities and the performance hall were taxable rentals of accommodations and subject to the tax.

Keeping the information previously discussed in mind, I will address the scenarios presented in the Taxpayer's letter.

Scenario 1: Indoor and outdoor space with tables, chairs and/or linens

The Taxpayer states that it is primarily concerned with the proper tax treatment of this scenario. Specifically, the Taxpayer questions if the provision of tangible personal property such as tables, chairs and linens makes the charges billed for the rental of indoor and outdoor space, i.e. , the plantation building and grounds, subject to the tax. In the Taxpayer's case, the rental charge is taxable, regardless of whether tangible personal property is provided in addition to the building and grounds. This type of transaction represents the rental of taxable accommodations in accordance with the definition of retail sale and the provisions of Va. Code § 58.1-603 4.

Scenario 2: Same as Scenario 1 with food and beverages

The Taxpayer has been billing sales tax on the entire invoice charge for this type of transaction because it provides food and beverages in addition to the rental of facilities. This is the correct treatment for this type of transaction for the same reasons set out for scenario #1. The Department's current policy also provides that charges for the rental of facilities by entities that are not in the business of renting rooms and accommodations to transients are subject to the retail sales tax only when the charges include the provision of food and beverages. P.D. 95-158 (6/16/95), which was cited by the Taxpayer, discusses a historic plantation that rented the mansion and grounds out for weddings, receptions and similar events. However, the plantation did not rent rooms and accommodations to transients on a regular basis. Therefore, only those rental transactions that included the provision of food and beverages were taxable.

Scenario 3: Same as Scenario 1 with use of kitchen facilities

The Taxpayer inquires whether the charge for the rental of an on-site kitchen to caterers that are hired by the Taxpayers customers is subject to sales tax. The Taxpayer does not provide food and beverages in this type of rental transaction but is merely charging for the use of the kitchen facilities by the caterer hired by another party. Consistent with my response in Scenario 1, the charge for the rental of the Taxpayer's kitchen facilities is taxable.

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/1-5169882522.S