Do hotels have to charge sales tax on meeting-room rentals, and are nonprofit organizations exempt from that tax?

Plain-English summary

A nonprofit organization that rents banquet and meeting rooms for its events asked the Department two related questions about Virginia's retail sales and use tax.

Background. Virginia Code § 58.1-623 presumes all sales or leases of tangible personal property are taxable until the taxpayer establishes otherwise, and because sales and use tax is a transactional tax, whether a specific charge is taxable depends on the actual documents supporting that transaction.

Question 1: Must hotels with banquet space and overnight accommodations charge tax on meeting-room rentals, even if no overnight stay is used? Generally, no. Fees for the use of real property alone — without an overnight stay — aren't taxable, as long as no tangible personal property is built into the total charge (citing P.D. 87-69, P.D. 98-85, P.D. 02-38, P.D. 12-82, and P.D. 23-74). Virginia's accommodations tax under § 58.1-603 4 applies to charges furnished to "transients," and the Department has long interpreted the "retail sale"/"accommodations"/"transient" definitions in § 58.1-602 to require an OVERNIGHT STAY before tax applies to venue-space rental that doesn't also transfer tangible personal property (23 VAC 10-210-690 B and several prior rulings). But § 58.1-603 separately taxes the rental of tangible personal property, and under existing Department policy, a single lump-sum charge covering both taxable and nontaxable items makes the WHOLE charge taxable (P.D. 87-69, P.D. 89-257, P.D. 20-177). So for a hotel's meeting-space charge to stay exempt, the invoices and contracts must reflect ONLY the charge for the space and related exempt services — any taxable property or services need a separate agreement and invoice.

Question 2: Are nonprofits exempt from sales tax on meeting-room rentals? Meeting-room rentals are already exempt under the analysis above — for individuals, businesses, and nonprofit organizations alike — as long as the rental isn't combined with tangible personal property or accommodations. Nonprofit status becomes relevant only when the organization wants to purchase or RENT actual tangible personal property tax-free. Virginia Code § 58.1-609.11 B allows that, but only if the nonprofit (i) files an application with the Department, (ii) meets a list of qualifying criteria, and (iii) is issued a certificate of exemption. Those criteria include: federal tax-exempt status under IRC §§ 501(c)(3), 501(c)(4), or 501(c)(19) (or a mission statement if gross receipts are under $5,000); proof of compliance with Virginia's charitable-solicitation law; administrative costs (including salaries and fundraising) capped at 40% of annual gross revenue; a CPA financial review for organizations with at least $750,000 in prior-year gross revenue (potentially a full audit above $1.5 million); an estimate of tangible personal property purchased in Virginia for the prior and current year; and either a copy of the organization's federal Form 990/990-EZ/990-PF/990-N or, if not required to file, contact information for two board members and access to its financial records.

What this means for you

Any organization renting meeting or event space

Keep the space charge on its own invoice, separate from any tangible personal property or catering/equipment charges. Bundling everything into one lump sum makes the WHOLE charge taxable — even the part that would otherwise be exempt.

Hotels and venues offering both overnight rooms and meeting space

The overnight-stay trigger applies to the actual transaction, not just to what else the venue offers. A meeting-space rental at a hotel that also rents overnight rooms is still exempt if that particular booking doesn't include an overnight stay AND the charge isn't bundled with taxable property.

Nonprofits renting event space or buying equipment

Don't assume nonprofit status alone makes a purchase tax-exempt. Meeting-room rentals are exempt for everyone under the general rule above, but buying or renting tangible personal property tax-free requires actually applying for and holding a Va. Code § 58.1-609.11 exemption certificate, which comes with real ongoing qualification requirements (administrative-cost cap, financial reporting, solicitation compliance).

Common questions

Q: Do I owe sales tax on a hotel meeting room if I'm not staying overnight?
A: No, as long as the charge for the space is billed separately from any tangible personal property or other taxable items — bundling them together makes the whole charge taxable.

Q: Are nonprofits automatically exempt from sales tax on event space rentals?
A: The rental itself is already exempt for everyone under the general rule, not because of nonprofit status specifically. Nonprofit status only matters for tax-exempt PURCHASES or rentals of tangible personal property.

Q: What does a nonprofit need to buy tangible personal property tax-free in Virginia?
A: A certificate of exemption from the Department under Va. Code § 58.1-609.11, obtained by applying and meeting criteria including 501(c)(3)/(4)/(19) status, an administrative-cost cap, and financial reporting requirements.

Q: What happens if I combine my meeting-room charge with catering or equipment rental on one invoice?
A: The Department's lump-sum policy taxes the entire combined charge, even the portion that would otherwise be an exempt real-property rental.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-623 — sales/leases of tangible personal property presumed taxable until exemption established
• Va. Code § 58.1-602 — defines "accommodations," "retail sale," and "transient"
• Va. Code § 58.1-603 — tax on accommodations and on rental of tangible personal property
• 23 VAC 10-210-690 B — overnight stay required for tax on venue-space rental without tangible personal property
• Va. Code § 58.1-609.11 — nonprofit exemption certificate for purchase/rental of tangible personal property

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 25-5

Original ruling text

January 10, 2025

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This will respond to your letter in which you request a ruling on the application of the retail sales and use tax to the rental of hotel event spaces and the exemption for nonprofit organizations.

FACTS

A nonprofit organization (the “Organization”) that rents banquet and meeting rooms for events asks two specific questions regarding the space rented by hotels. Each question will be addressed separately below.

This ruling is based on the facts provided by the Taxpayer and summarized above. Any change in facts or the introduction of new facts may lead to a different result.

RULING

For purposes of Virginia’s retail sales and use tax, Virginia Code § 58.1-623 provides that all sales or leases of tangible personal property are presumed to be subject to tax until the contrary is established. Because the sales and use tax is a transactional tax, the determination as to the taxation of a specific transaction is based on the underlying documents that support the transaction.

Question 1

Must hotels that offer banquet space and overnight accommodations (even if no overnight accommodations are used) charge sales tax on rentals of their meeting space?

Generally, fees charged for the use of real property, for which an overnight stay is not included, are not taxable provided that no tangible personal property is built in to the total rental charge. See Public Document (P.D.) 87-69 (2/27/1987), P.D. 98-85 (5/7/1998), P.D. 02-38 (4/1/2002), P.D. 12-82 (5/11/2012), and P.D. 23-74 (6/23/2023).

Virginia Code § 58.1-603 4 provides that the sales tax applies to “gross proceeds derived from the sale or charges for accommodations furnished to transients as set out in the definition of ‘retail sale’ in Virginia Code § 58.1-602.” The Department has interpreted the definitions of “retail sale,” “accommodations,” and “transient” found in Virginia Code § 58.1-602 to require an overnight stay for tax to apply to the rental of venue space without the transfer of tangible personal property. See Title 23 of the Virginia Administrative Code (VAC) 10-210-690 B, P.D. 96-23 (3/29/1996), P.D. 04-208 (11/30/2004), and P.D. 13-212 (11/14/2013).

Further, Virginia Code § 58.1-603 imposes the retail sales tax on the sale or rental of tangible personal property in Virginia. The tax is imposed on the gross proceeds derived from a lease or rental of tangible personal property. “Gross Proceeds” includes the total amount charged for tangible personal property. See Virginia Code § 58.1-602. The Department has determined that when a dealer charges one lump sum amount for both taxable and nontaxable items in a transaction, the tax is applied to the entire transaction. See P.D. 87-69, P.D. 89-257 (9/25/1989), and P.D. 20-177 (10/6/2020).

In order for a conference, event, or meeting space in a hotel or a venue that offers overnight accommodations to be exempt from tax, the rental documents, invoices, contracts, or similar transaction documents can only reflect the charge for the desired space and related exempt services. Charges for taxable property or services would have to be provided under a separate agreement and invoice.

Question 2

Would nonprofit organizations be exempt from paying the retail sales tax on meeting room rental?

As indicated above, meeting room rentals are exempt from the retail sales and use tax unless they are combined with the provision of tangible personal property or accommodations. This would apply to individuals, businesses, and nonprofit organizations.

With regard to the purchase or rental of tangible personal property, Virginia Code § 58.1-609.11 B provides that a nonprofit entity may purchase or rent such property for its use or consumption provided that it (i) files an appropriate application with the Department, (ii) meets the applicable criteria, and (iii) is issued a certificate of exemption from the Department for the period of time covered by the certificate.

To qualify for an exemption, a nonprofit organization must meet all of the following requirements:

• The organization must be exempt from federal income taxation under §§ 501(c)(3), 501(c)(4), or 501(c)(19) of the Internal Revenue Code (IRC). If the organization has annual gross receipts less than $5,000 and is organized for one of the purposes set in IRC §§ 501(c)(3) or 501(c)(4), it must submit a mission statement.

• The organization must provide proof of compliance with Virginia’s law relating to organizations that solicit contributions in Virginia.

• The annual administrative costs of the organization, including salaries and fundraising, must not exceed 40% of its annual gross revenue.

• An organization with gross annual revenue of at least $750,000 in the previous year must provide a financial review performed by an independent Certified Public Accountant (CPA). The Department may require an organization with gross annual revenue of at least $1.5 million in the previous year to provide a financial audit performed by an independent CPA in lieu of a financial review.

• The organization must provide an estimate of the total amount of tangible personal property purchased in Virginia for the preceding year and the current year. Purchases of any tangible personal property that will be furnished to a contractor performing construction, installation, repair or any other service with respect to real property are not included.

• If the organization is required to file a federal Form 990, 990EZ, 990PF, or 990N with the Internal Revenue Service (IRS), a copy must be provided to the Department.

• If the organization is not required to file, the names and address of two members of the organization’s Board of Directors must be provided along with the location of the financial records. All financial records must be available for inspection.

In order to make purchases of tangible personal property and the rental of accommodations exempt of sales tax, a nonprofit organization must obtain a certificate of exemption from the Department. Nonprofit entities can apply for exemption certificates through the Department’s website. Accordingly, the Organization would be exempt from paying sales tax for the purchase or rental of eligible tangible personal property provided it follows the procedures set forth in Virginia Code § 58.1-609.11 and obtains the proper exemption certificate from the Department.

The Code of Virginia sections and regulation cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy and Legal Affairs, Adjudication and Resolution Division, at or **.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR/4935.B

Related Documents

87-69

87-89

89-257

96-23

98-85

02-38

04-208

09-2

12-82

13-212

20-177

23-74