Are separately billed hotel parking charges subject to Virginia sales tax when the customer also buys accommodations?

Subject

Hotel guest parking was taxable, but parking-only sales were not

Plain-English summary

Virginia taxed parking charges when the same customer also purchased hotel accommodations. The charges were additional services connected with the room and therefore part of the taxable lodging price, even though the hotel billed them outside room revenue.

Parking sold without accommodations was different and remained outside Virginia retail sales tax.

Result: the paid assessments on hotel-guest parking stood, and no refund was due.

What this means for you

• Identify whether parking is sold to a lodging guest or a parking-only customer.
• Separate accounting does not override the connection to accommodations.
• Apply lodging tax treatment to guest parking and document stand-alone parking separately.

Common questions

Q: Did a separate parking line make it exempt?

A: No. Its connection with the hotel stay controlled.

Q: Was stand-alone parking taxable under this ruling?

A: No. Parking-only charges were not subject to the retail sales tax.

Citations and references

• Va. Code § 58.1-602.
• 23 VAC 10-210-730(C).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-114

Original ruling text

June 16, 2015

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the "Taxpayer") in which you seek correction of the retail sales and use tax assessments issued for the period October 2010 through September 2013. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer operates hotels in Virginia. The Taxpayer was assessed tax in the audit on charges for parking to its customers who purchase accommodations at the hotel. The Taxpayer contests the assessment and maintains that the charges are separate ancillary charges that are not subject to the retail sales and use tax. The Taxpayer states that the hotel does not include the charges within the room rental (package) rate, and the charges are billed outside of the taxable (room) revenue.

DETERMINATION

Virginia Code § 58.1-602 defines sales price as:

The total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without

any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever.

Title 23 of the Virginia Administrative Code 10-210-730 C provides that:

Any additional charges made in connection with the rental of a room or other lodging or accommodations are deemed to be a part of the charge for the room and are subject to the tax. For example, additional charges for movies, local telephone calls and similar services are subject to the tax. Toll charges for long-distance telephone calls are not subject to the tax.

Based upon the information provided, it is my understanding that the Taxpayer charges its customers for parking both when the customers purchase hotel accommodations and in instances where hotel accommodations are not purchased. As provided in the aforementioned authorities, additional charges made in connection with the purchase of hotel accommodations are deemed to be a part of the charge for the room. In this instance, the charges for parking to customers who also purchased accommodations from the Taxpayer are deemed to be a part of the charge for the room. Charges for parking only are not subject to the retail sales tax. Accordingly, the parking charges associated with the sale of accommodations are subject to the retail sales tax.

In Public Document (P.D.) 92-120 (6/29/92), the taxpayer owned a number of hotels and requested a ruling on the applicability of the retail sales and use tax on various transactions. The ruling states that "the tax treatment of a transaction will vary dependent upon the way the transaction is structured." It was further ruled that "if parking is included as an item in the charge for the room, the charge will be taxable as part of the total charge." Charges for parking only are exempt of the tax.

In P.D. 96-296 (10/21/96) and P.D. 95-17 (2/2/95), it was ruled that services sold in connection with accommodations are taxable as part of the charge for the room.

In accordance with the foregoing authorities, the assessments are correct as issued. The assessments have been paid in full by the Taxpayer, and a refund is not due to the Taxpayer.

The Code of Virginia sections, regulation and public documents cited 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 about this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-5769013171.P