If I book a hotel through an online travel site like Expedia or Airbnb, is Virginia sales tax now charged on the full price I pay, including the site's service fee?

Plain-English summary

Before September 1, 2021, when a customer booked a hotel room or other transient accommodation through an online booking platform (an "accommodations intermediary" like an online travel agency), Virginia's Retail Sales and Use Tax was computed only on the discounted amount the platform actually paid the hotel -- NOT on the platform's own markup or service fee. Under 2021 Senate Bill 1398, that changes: beginning September 1, 2021, the tax is computed on the FULL price the customer actually pays, including any fee the intermediary keeps for facilitating the booking. The change makes similar adjustments to local transient occupancy taxes (and certain state-imposed transportation-purpose occupancy taxes administered the same way).

New key terms. These guidelines define the players involved: an "accommodations provider" is the hotel, short-term rental host, or similar business that actually furnishes the room; an "accommodations intermediary" is a third party (not the provider itself) that facilitates the sale, charges the customer a "room charge," and keeps an "accommodations fee" as its own compensation. A platform ISN'T treated as an intermediary if it operates under the provider's own brand, or if it only earns a straight commission from the provider (rather than marking up the price to the customer).

Who collects and remits what. Starting September 1, 2021, an accommodations intermediary is treated as the taxable "dealer" for any sale it facilitates, and must collect sales tax on the full room charge (the total price paid by the customer, including its fee). What happens next depends on the type of accommodation: for a HOTEL stay, the intermediary remits tax on just its own accommodations fee directly to the Department, and passes along the remaining tax (on the discounted amount) to the hotel, which remits that portion; for a NON-hotel accommodation (like a short-term rental), the intermediary remits the ENTIRE tax on the full transaction itself. Any additional charges outside the "room charge" (like paid movie rentals during a hotel stay) remain the accommodations provider's own responsibility to tax and remit.

Marketplace facilitator waivers no longer apply here. Some intermediaries had previously obtained waivers from their general marketplace-facilitator collection duties (for undue hardship, or because all their sellers were already registered dealers). Senate Bill 1398 overrides those waivers specifically for accommodations sales going forward -- an intermediary can't use an existing or new waiver to push its new accommodations-tax collection duty onto the accommodations provider instead.

Timing matters -- both furnished AND paid. The new rule applies only when the accommodation is BOTH furnished to the guest on or after September 1, 2021, AND paid for on or after that date. A reservation booked and fully paid before September 1 isn't affected even if the stay happens later; conversely, a stay that occurred before September 1 but wasn't paid for until after that date also ISN'T affected, since the guidelines require BOTH conditions to be met.

What this means for you

Travelers booking hotels or short-term rentals through an online travel agency, vacation rental platform, or similar booking site

Since September 1, 2021, expect sales tax to be calculated on the TOTAL price you pay -- including the platform's service/booking fee -- not just the discounted rate the platform pays the property. This generally means a somewhat higher tax amount on bookings made through these intermediaries compared to booking directly with the hotel or host.

Online travel agencies, vacation rental platforms, and similar accommodations intermediaries

You are now the taxable "dealer" responsible for collecting sales tax on the FULL room charge for any Virginia accommodation you facilitate, effective for stays furnished and paid on or after September 1, 2021. For hotel bookings, remit tax on your own fee directly and pass the rest to the hotel; for non-hotel bookings (like short-term rentals), remit the full tax yourself. You can no longer rely on a marketplace-facilitator waiver to shift this specific collection duty to the property.

Hotels, short-term rental hosts, and other accommodations providers who work with booking platforms

You're still responsible for collecting and remitting tax on any additional taxable charges outside the platform's "room charge" (e.g., paid in-room services). For hotel-specific bookings, you'll receive and must remit the intermediary's pass-through portion of the tax on the discounted room rate.

Common questions

Q: Why did the sales tax on my online travel-site hotel booking go up after September 1, 2021?
A: Because Virginia's Retail Sales and Use Tax is now calculated on the FULL price you pay -- including the booking platform's own service fee -- rather than just the discounted rate the platform pays the hotel.

Q: Who actually collects and sends in the sales tax when I book through an intermediary like an online travel agency?
A: The intermediary itself is now treated as the taxable dealer. For a hotel stay, it remits tax on its own fee and passes the rest to the hotel to remit; for a non-hotel accommodation (like a short-term rental), the intermediary remits the entire tax itself.

Q: I booked and fully paid for a hotel stay in August 2021 for a trip happening in October 2021 -- does the new rule apply to me?
A: No -- because the reservation was paid for in full before September 1, 2021, the law change doesn't apply, even though the stay itself happens after that date.

Q: Can an online booking platform avoid this new collection duty by using its existing marketplace-facilitator waiver?
A: No -- Senate Bill 1398 specifically overrides existing or new marketplace-facilitator waivers for this particular accommodations-tax collection duty; intermediaries can't transfer that duty to the accommodations provider.

Citations and references

• Public Document 06-139 (10/24/2006) -- the Department's prior position (superseded by SB 1398 for post-9/1/2021 transactions) that sales tax on transient accommodations was computed only on the amount paid to the provider, without regard to a third-party facilitator's service fee
• Public Document 20-43 (6/27/2019) (Guidelines for Remote Sellers and Marketplace Facilitators) -- referenced for accommodations intermediaries that may separately have marketplace-facilitator registration/collection obligations

Subject

Guidelines for the Application of the Retail Sales and Use Tax to Sales of Accommodations Facilitated by Accommodations Intermediaries

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-116

Original ruling text

Guidelines for the Application of the Retail Sales and Use Tax to Sales of Accommodations Facilitated by Accommodations Intermediaries

Senate Bill 1398 (2021 Acts of Assembly , Special Session I, Chapter 383) changes the application of the Retail Sales and Use Tax to sales of accommodations facilitated by accommodations intermediaries beginning September 1, 2021. The legislation makes similar changes to the local transient occupancy taxes. Additionally, these changes will apply to the state imposed transient occupancy taxes that fund transportation purposes in certain localities under Va. Code § 58.1-1743 and Va. Code § 58.1-1744 because these taxes are administered by local governments in the same manner as their local transient occupancy taxes. These guidelines provide processes and procedures for implementing the provisions of Va. Code §§ 58.1-602, 58.1-603, and 58.1-612.2, relating to the Retail Sales and Use Taxation of accommodations, as required by Senate Bill 1398.

These guidelines are not rules or regulations subject to the provisions of the Administrative Process Act ( Va. Code § 2.2-4000 et seq .) and are being published in accordance with the requirement that the Tax Commissioner publish these guidelines pursuant to the third enactment clause of 2021 Senate Bill 1389, as well as the Tax Commissioner’s general authority to supervise the administration of the tax laws of the Commonwealth pursuant to Va. Code § 58.1-202. As necessary, additional information will be published and posted on the Department of Taxation’s (“the Department’s”) website, www.tax.virginia.gov .

These guidelines represent the Department’s interpretation of the relevant laws. They do not constitute formal rulemaking and hence do not have the force and effect of law or regulation. In the event that the final determination of any court holds that any provision of these guidelines is contrary to law, taxpayers who follow these guidelines will be treated as relying on erroneous written advice for purposes of waiving penalty and interest under Va. Code §§ 58.1-105, 58.1-1835, and 58.1-1845. To the extent there is a question regarding the application of these guidelines, taxpayers are encouraged to write to the Department and seek a written response to their question.

Background on the Taxation of Accommodations

In Public Document 06-139 (October 24, 2006), the Department determined that the Retail Sales and Use Tax levied on transient accommodations is to be computed only upon the amount paid to the provider of the accommodations without regard to any service fee paid to a third-party facilitator of the rental transaction.

Senate Bill 1398 changes this treatment by providing that, beginning September 1, 2021, the Retail Sales and Use Tax shall be calculated based on the total charges or the total price paid for the use or possession of transient lodgings, including any fees charged by accommodations intermediaries for the facilitation of transactions for the provision of transient accommodations.

Definitions

Senate Bill 1398 provides several new definitions for purposes of the Retail Sales and Use Tax. (See Va. Code § 58.1-602).

“Accommodations” means any room or rooms, lodgings, or accommodations in 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.

“Accommodations fee” means the room charge less the discount room charge, if any, provided that the accommodations fee shall not be less than $0.

“Accommodations intermediary” means any person other than an accommodations provider that facilitates the sale of an accommodation, charges a room charge to the customer, and charges an accommodations fee to the customer, which fee it retains as compensation for facilitating the sale. For purposes of this definition, “facilitates the sale” includes brokering, coordinating, or in any other way arranging for the purchase of the right to use accommodations via a transaction directly, including via one or more payment processors, between a customer and an accommodations provider. An “accommodations intermediary” does not include a person:

If the accommodations are provided by an accommodations provider operating under a trademark, trade name, or service mark belonging to such person; or

Who facilitates the sale of an accommodation if (i) the price paid by the customer to such person is equal to the price paid by such person to the accommodations provider for the use of the accommodations and (ii) the only compensation received by such person for facilitating the sale of the accommodation is a commission paid from the accommodations provider to such person.

“Accommodations provider” means any person that furnishes accommodations to the general public for compensation. The term “furnishes” includes the sale of use or possession or the sale of the right to use or possess.

“Affiliate” means with respect to any person, any other person directly or indirectly controlling, controlled by, or under common control with such person. For purposes of this definition, ‘control’ (including control by and under common control with) shall mean the power, directly or indirectly, to direct or cause the direction of the management and policies of such person whether through ownership or voting securities or by contract or otherwise.

“Discount room charge” means the full amount charged by the accommodations provider to the accommodations intermediary, or an affiliate thereof, for furnishing the accommodations.

“Room charge” means the full retail price charged to the customer by the accommodations intermediary for the use of the accommodations, including any accommodations fee as well as any charges made in connection with the rental of the accommodations, before taxes. The room charge shall be determined in accordance with 23 Virginia Administrative Code (“VAC”) 10-210-730 and the related rulings of the Department on the same.

Collection of the Tax

Beginning September 1, 2021, for any retail sale of accommodations facilitated by an accommodations intermediary, the accommodations intermediary shall be deemed a dealer making a retail sale of accommodations and must collect the Retail Sales and Use Tax computed on the room charge.

When the accommodations are at a hotel, the accommodations intermediary shall remit the Retail Sales and Use Tax on the accommodations fee to the Department. Any remaining Retail Sales and Use Tax must be remitted to the hotel, which shall remit such taxes to the Department. If the accommodations are not at a hotel, the accommodations intermediary shall remit the Retail Sales and Use Tax on the entire transaction to the Department. (See Va. Code § 58.1-612.2 B).

Additional charges levied in connection with the rental of accommodations that are not part of the “room charge” and the tax collectible on such charges are collectible from the customer by the accommodations provider. In such instances, the accommodations provider shall remit the taxes collected on the additional charges to the Department and the locality, as appropriate. (See 23 VAC 10-210-730)

Invoice Requirements

In any retail sale of accommodations facilitated by an accommodations intermediary, the accommodations intermediary shall separately state the amount of the tax on the bill, invoice, or similar documentation and shall add the tax to the room charge. Thereafter, the tax shall be a debt from the customer to the accommodations intermediary, recoverable at law in the same manner as other debts. Where the retail sale of accommodations is not facilitated by an accommodations intermediary, the accommodations provider shall separately state the amount of the tax in the bill, invoice, or similar documentation and shall add the tax to the total price paid for the use or possession of the accommodations. (See Va. Code § 58.1-612.2 E).

Marketplace Facilitators

Accommodations intermediaries may have an obligation to register and collect the Retail Sales and Use Tax as marketplace facilitators. For additional information, please see the Guidelines for Remote Sellers and Marketplace Facilitators, Public Document 20-43 (June 27, 2019).

Marketplace facilitators are generally permitted to apply for waivers of their duty to collect and remit tax pursuant to Va. Code § 58.1-612.1 D 3 based on a showing either of undue hardship or that all of their marketplace sellers are already registered dealers. In the past, these waivers may have permitted accommodations intermediaries to allow accommodations providers to collect and remit all taxes due on retail sales of accommodations.

Senate Bill 1398, however, specifies instances in which an accommodations intermediary must collect the Retail Sales and Use Tax and remit such tax to the Department, and does not allow affected taxpayers to obtain similar waivers or to use existing waivers. Accommodations intermediaries, where they are deemed dealers for purposes of a retail sale of accommodations, may not assign or otherwise transfer their duty to collect and remit taxes as required by law to accommodations providers or any other entity.

The accommodations intermediary is required to collect the Retail Sales and Use Tax on the room charge. When the accommodations are at a short-term rental, as defined in Va. Code § 15.2-983, or any other accommodation aside from a hotel, then the accommodations intermediary is required to remit the Retail Sales and Use Tax on the full room charge to the Department. (See Va. Code § 58.1-612.2 B).

When the accommodations are at a hotel, the accommodations intermediary is required to remit the taxes on the accommodations fee to the Department. The accommodations intermediary must then remit any remaining taxes to the hotel, and the hotel is required to remit such taxes to the Department. In such cases, the accommodations intermediary does not need to request a waiver under the marketplace facilitator legislation since the hotel is explicitly required to remit the tax under Va. Code § 58.1-612.2 B. However, the accommodations intermediary does have the obligation to collect the Retail Sales and Use Tax from the customer and remit it to the hotel. (See Va. Code § 58.1-612.2 B).

Effective Date of Law Change

The law change applies to rentals of accommodations to transients on and after September 1, 2021. Accommodations i) furnished on or after September 1, 2021, and ii) paid for on or after September 1, 2021, are subject to the law change regardless of when the rental was reserved. The law change will not apply to accommodations furnished to transients prior to September 1, 2021, but paid for on or after September 1, 2021; nor will it apply when the accommodations are paid for in full prior to September 1, 2021, even if the accommodations are not furnished to the transient until on or after September 1, 2021.

Retail Sales and Tax Rates

Retail Sales and Use Tax vary by locality. The tax rates for each locality are available on the Department’s website, www.tax.virginia.gov .

Examples

Example 1 . On September 3, 2021, a customer books and pays for a one-night reservation for a hotel to be occupied on September 13, 2021 through an accommodations intermediary’s website at a rate of $100 per night plus an accommodations fee of $10. The accommodations intermediary had previously applied for and obtained a waiver of its obligation to collect taxes pursuant to Va. Code § 58.1-612.1 D 3. However, pursuant to Va. Code § 58.1-612.2 B, the accommodations intermediary is required to remit the Retail Sales and Use Tax on the $10 accommodations fee to the Department. The accommodations intermediary must then remit the Retail Sales and Use Tax on the $100 discount room charge to the hotel, which must remit the taxes to the Department.

If the customer had booked and paid for the reservation prior to September 1, 2021, even though the accommodations were to be occupied after September 1, 2021, the law change would not affect the transaction.

Example 2 . On August 1, 2021, a customer books, but does not pay for, a reservation at a hotel through an accommodations intermediary’s website for August 28, 2021. The customer subsequently stays one night and therefore vacates the room before September 1, 2021. The customer pays for the reservation on September 2, 2021. The law change would not have any effect on the transaction since the accommodations were furnished before September 1, 2021 despite the fact that the customer paid after September 1.

If the same customer extended their stay until September 1, 2021 and paid for the extended period on or after September 1, 2021, the law change would apply to the accommodations furnished and paid for after September 1, 2021 but not the accommodations furnished and paid for in August.

Example 3 . A customer books a one-night reservation with a hotel through the hotel’s website. No facilitator is involved in the reservation. As the hotel is the dealer in this transaction, the Retail Sales and Use Tax would be remitted by the hotel to the Department on the hotel’s next monthly sales tax return.

Example 4 . A customer books a one-night reservation for a hotel through an accommodations intermediary’s website after September 1, 2021. The Retail Sales and Use Tax levied on the accommodations fee would be remitted by the intermediary to the Department on the intermediary’s next monthly sales tax return. The remaining Retail Sales and Use Tax collected on the transaction would be remitted to the hotel for the hotel to remit to the Department with the hotel’s next monthly sales tax return.

If the customer had accrued additional charges for a taxable item, such as movie rentals during the stay at the hotel, and such charges were not part of the total room charge collected by the intermediary, it is the hotel’s responsibility to collect the Retail Sales and Use Tax due on those charges from the customer and remit the taxes to the Department.

Additional Information

These guidelines are available online under the Guidance Documents section of the Department’s website, located at http://tax.virginia.gov/guidance-documents . The Department will issue additional guidance regarding this law change if necessary. For additional information, please visit www.tax.virginia.gov or contact the Department at (804) 367-8037.

Approved:

Craig M. Burns

Tax Commissioner

Related Documents

06-139

20-43