Relates to facilitating the compliance of room remarketers with their obligation to collect sales tax on their sales of occupancy

Summary of provisions

Sections 1 and 2 of this bill adds new subdivision (r) to section 1111 of the Tax Law and the accompanying reference change, which would provide the following relief to room remarketers. First, with regard to transactions in which a customer obtains occupancy together with other items, for one price, this bill provides room remarketers with a way of computing the portion of the bill taxable as rent; the room remarketers may compute such amount based on the consideration payable to the hotel for the occupancy relative to the consideration payable for the other items, or may use any other method authorized by the commissioner Second, the bill would permit room remarketers to not specify the amount of the sales tax due on occupancy at the time the customer makes the reservation and instead to provide the information on any invoice given to the customer prior to the completion of the occupancy. Third, room remarketers would report occupancy transactions in the sales tax filing period in which the occupancy ended, rather than in the sales tax period during which they collected the consideration for the occupancy. Fourth, section 3 of this bill amends Tax Law section 1119(e) to relieve a room remarketer of the burden of obtaining the certificate of authority number of the hotel that sold the occupancy in order to qualify for a credit or refund of the sales tax the room remarketer paid to the hotel for the occupancy.

Section 3 allows room remarketers to supply certain identifying information about the hotel, including its address and telephone number, instead of the certificate of authority number when the hotel refuses to supply the latter number.

Sections 4-6 of the bill amends the New York City Administrative Code to make some similar changes to provisions regarding room remarketers' obligation to collect the City's hotel room occupancy tax and to change some internal cross-references to other sections of the Administrative Code.

Existing law

Sales tax must generally be reported in the filing period in which the seller collected the receipts from the sale (Tax Law §1137 a)). The seller must separately state the sales tax on any bill, invoice or other memorandum of sale given to the customer (Tax Law § 1132 a 1). Finally, if a room remarketer transaction involves a sale of occupancy together with the other items that are not taxable, the charge for the whole bundle is taxable as rent unless the room remarketer separately states on any invoice given to the customer a charge for rent that is reasonable in relation to the value of the other components of the bundle (Tax Law § 1105e 2))

Justification

Last year's budget bill (section 4 of part AA of Chapter 57 of the Laws of 2010) required room remarketers to collect sales tax on sales of occupancy, and required room remarketers to collect New York City hotel room occupancy taxes, while granting them a credit for sales tax they paid to the hotels where the occupancy took place. This bill makes a number of changes in the Tax Law and to the New York City Administrative Code to better conform procedures to the manner in which room remarketers have traditionally done business, thereby lessening the compliance burden on them. First, this bill revises the rule in last year's legislation regarding sales in which a room remarketer bundles occupancy with nontaxable items, such as airfare. Under last year's bill, the room remarketer had to separately state the occupancy portion of the price of the bundle ("bundled price") or treat the full amount of the bundled price as rent and collect tax on that amount. The traditional practice in the industry, however, is not to separately state the price of the occupancy portion of the bundle on the invoice given the customer. This bill conforms the sales tax and New York occupancy tax to this industry practice by allowing a room remarketer to calculate the portion of the bill taxable as rent based on the consideration payable to the hotel for the occupancy relative to the consideration payable for the other items. The bill also allows the room remarketers to calculate the portion of the bill taxable as rent based on any other method authorized by the commissioner. With respect to New York City hotel occupancy tax, the bill provides that the room remarketer may calculate the portion of the bill taxable as rent based on the formula outlined above or, alternatively, use any other reasonable method pursuant to which the rent portion of the consideration would be no less than the computation of rent under the formula. Under last year's legislation, room remarketers are subject to the usual sales tax rule that requires sales tax to be separately stated on any invoice given the customer. The websites of most room remarketers, however, are not set up to separate the state and local sales tax from other taxes due on the occupancy. This bill would relieve room remarketers of the need to undertake the wholesale reprogramming of their sites to perform this task and allowing them

to meet the separate statement requirement for both New York sales tax and New York City hotel occupancy t ax with an invoice showing such tax provided to the customer any time up to the end of the occupancy. Last year's bill required room remarketers to report tax in the period in which the room remarketer debited the customer's credit card for the occupancy. While this is the usual sales tax rule, it is not well suited to the room remarketer industry. Because of the ease with which reservations can be made or changed, customers of room remarketers often cancel reservations or change the dates of the reservations. If the reservation is made in one reporting period, and cancelled in another, however, sales tax refund claims would be generated, because the room remarketer would have already had to remit to the State the sales tax due on the occupancy. This bill would obviate the need for such refund claims by allowing room remarketers to report the tax due on occupancy and remit the tax to the State in the filing period in which the occupancy actually occurs, as is current practice with respect to the New York City hotel room occupancy tax. This bill also facilitates the process by which room remarketers obtain credit or refund of the sales tax they paid to the hotels that provide the occupancy that is part of the room remarketers' transactions. Last year's bill required a room remarketer to obtain the certificate of authority number of the hotel that sold it the occupancy in order to qualify for a credit or refund of the sales tax the remarketer paid the hotel for the occupancy. Because hotels sometimes refuse to supply that number, this bill allows room remarketers, in the event of such a refusal, to substitute certain identifying information about the hotel, including its address and telephone number.

Legislative history

New Legislation.

Fiscal implications

None.

Effective date

This bill would become effective on September 1, 2012, and would apply to occupancies commencing on or after that date.