LR 8221
Taxability of Utilities Purchased by a Hotel
November 23, 2022
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated October 20, 2022.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a utility company that provides public services. On April 29, 2021, Applicant received a letter from the Department of Revenue stating that hotels may no longer purchase utilities exempt from sales tax as a result of the decision in D.I. Supply I LLC, v. Director of Revenue, 601 S.W.3d 195 (Mo. banc 2020). As a result, Applicant was notified that exemption certificates submitted by hotels relating to exempt utilities should no longer be accepted.
In August of 2022, Applicant received a letter from one of their customers explaining that a bill was passed during the 2022 State Legislative session, SB 745. The letter details that utilities used by guests in hotels, motels, or other transient accommodation establishments are not subject to sales tax.
ISSUE:
Is Applicant required to charge sales tax to hotels, motels, and other transient accommodation establishments for sales of utilities?
RESPONSE:
No, Applicant should not charge sales tax to hotels, motels, and other transient accommodation establishments for sales of utilities used to heat, cool, or provide water or power to the guests' accommodations of such establishments, including sleeping rooms, meeting and banquet rooms, and any other customer space rented by guests, and which are included in the charge made for such accommodations. However, Applicant should charge sales tax for sales of utilities used in common areas.
Prior to the passing of Senate Bill 745 during the 2022 State Legislative Session, sales of utilities to hotels, motels, and other transient accommodation establishments were subject to sales tax, as explained in D.I. Supply I v. Director of Revenue. With the passage of SB 745 in 2022, sales of these utilities were added to the list of exclusions from sales tax found in section 144.011.1, RSMo.
Section 144.011.1(12), RSMo, provides, in relevant part:
The purchase by persons operating hotels, motels, or other transient accommodation establishments of electricity, electrical current, water, and gas, whether natural or artificial, which are used to heat, cool, or provide water or power to the guests' accommodations of such establishments, including sleeping rooms, meeting and banquet rooms, and any other customer space rented by guests, and which are included in the charge made for such accommodations. Any person required to remit sales tax on such purchases prior to August 28, 2022, shall be entitled to a refund on such taxes remitted.
Applicant is no longer required to collect and remit sales tax on sales of utilities to hotels, motels, or other transient accommodation establishments, as long as the utilities are used to heat, cool, or provide water or power to the guests' accommodations of such establishments, including sleeping rooms, meeting and banquet rooms, and any other customer space rented by guests, and which are included in the charge made for such accommodations. The exclusion does not apply for utilities used in common areas, only in guest accommodations and guest-rented spaces, as explained in section 144.011.1(12), RSMo. Because Senate Bill 745 added sales of these utilities to the list of exclusions from tax, exemption certificates are no longer required to be retained by the seller.
Applicant can accept, in good faith, utilities studies presented by hotels, motels, or other transient accommodation establishments that show what percentage of utilities are used to heat, cool, or provide water or power to the guests' accommodations of such establishments, including sleeping rooms, meeting and banquet rooms, and any other customer space.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford