86 Ill. Adm. Code 4800.480.101
Nature, Rate and Scope of the Tax
Section 480
TITLE 86: REVENUE
CHAPTER I: DEPARTMENT OF REVENUE
PART 480 HOTEL OPERATORS' OCCUPATION TAX ACT
SECTION 480.101 NATURE, RATE AND SCOPE OF THE TAX
Section 480.101 Nature, Rate and Scope of the Tax
a) Nature and Rate of Tax
1) The
Hotel Operators' Occupation Tax Act (the Act) imposes a tax upon hotel
operators at the rate of 5% of 94% of the gross rental receipts from engaging
in business as a hotel operator, excluding, however, from the gross rental
receipts, the proceeds of renting, leasing or letting hotel rooms to permanent
residents of a hotel (i.e., from persons who occupy or have the right to occupy
such rooms for at least 30 consecutive days) and proceeds from the tax imposed
under subsection (c) of Section 13 of the Metropolitan Pier and Exposition Act.
2) There
is also imposed an additional tax upon hotel operators at the rate of 1% of 94%
of the gross rental receipts received by the hotel operator from engaging in
business as a hotel operator, excluding, however, from gross rental receipts,
the proceeds of the renting, leasing or letting to permanent residents of that
hotel and proceeds from the tax imposed under subsection (c) of Section 13 of
the Metropolitan Pier and Exposition Act.
3) A
hotel is any kind of building in which the public may, for a consideration,
obtain living quarters or sleeping or housekeeping accommodations (e.g.,
hunting lodges, camps, cabins, apartments, houses and rooms). (For a more
complete definition of "hotel", see Section 480.105.)
4) The
exclusion for permanent residents means that the tax is imposed on hotel operators
engaging in the business as a hotel operator renting rooms for use as living
quarters, or for sleeping or housekeeping accommodations, when renting is done
on a transient basis.
5) The
tax is an occupation tax whose legal incidence is on the lessor of the rooms.
Nevertheless, persons subject to the tax imposed by the Hotel Operators'
Occupation Tax Act may reimburse themselves for their tax liability under the
Act by separately stating the tax as an additional charge that may be stated in
combination, in a single amount, with any locally imposed hotel operators' occupation
tax.
If any hotel operator collects an amount (however designated) which
purports to reimburse such operator for hotel operators' occupation tax
liability measured by receipts which are not subject to hotel operators'
occupation tax, or if any hotel operator, in collecting an amount (however
designated) which purports to reimburse such operator for hotel operators'
occupation tax liability measured by receipts which are subject to tax under
the
Act, collects more from the guest or re-renter than the
operator's
hotel
operators' occupation tax liability in the transaction is, the guest or
re-renter, as applicable, shall have a legal right to claim a refund of such
amount from such operator. However, if such amount is not refunded to the
guest or re-renter, as applicable, for any reason, the hotel operator is liable
to pay such amount to the Department.
[35 ILCS 145/3(f)]
6) Any
amount added to a taxable rental charge and collected because of the tax also
represents a portion of the gross rental receipts that are subject to the tax.
However, the tax rate, instead of being a flat 6% of total receipts, has been
adjusted by the General Assembly to be 5% of 94% plus 1% of 94% of total
receipts, in order to avoid the payment of tax on amounts added to rental
charges because of the tax.
7) Persons
who engage in the business of renting, leasing or letting of rooms that are not
subject to tax under the Hotel Operators' Occupation Tax Act (e.g., the rentals
are only to permanent residents or the rentals are exempt as provided in subsection
(c)(2)) are not required to register and remit the tax imposed by the Hotel
Operators' Occupation Tax Act.
8) Re-renters
A)
Beginning
on July 1, 2024, if the renting, leasing, or letting of a hotel room is done
through a re-renter of hotel rooms, then, subject to the provisions of
subsections
(a)(8)(D) and (a)(8)(E)
, the re-renter is the hotel operator for the
purposes of the taxes under
subsections (a)(1) and (a)(2)
.
EXAMPLE 1: Company contracts with
Hotel Operator for 10 rooms in Hotel Operator's hotel for specific dates and
pays Hotel Operator for the rooms. Guests can book hotel rooms through the
Company's website, including 1 of the 10 rooms in the Hotel Operator's hotel.
Company collects and retains the rent from the guest renting the room. The
Company is a re-renter of the hotel rooms rented from Hotel Operator,
is the hotel operator for purposes of the tax, and is
liable for taxes on the rent collected from the person.
EXAMPLE
2: Company operates a website that lists hotel rooms that guests may rent
through the Company's website. A guest selects a hotel and the type of room
the guest wishes to rent. The Company's system verifies the availability of
the room with the Hotel Operator, rents and pays for the room, and confirms the
booking with the guest. The Company collects and retains the rent it quoted
the guest. The Company is a re-renter of the hotel room rented from Hotel
Operator, is the hotel operator for purposes of the tax, and is liable for
taxes on the rent collected from the person.
EXAMPLE 3: Company operates a
website that lists hotel rooms that guests may rent through the Company's
website. A guest selects a hotel and the type of room the guest wishes to
rent. The Company's system verifies with the availability of the room with the
Hotel Operator and facilitates the rental of the room to the guest. The
Company collects the rent it quoted the guest. The Company subsequently sends
the rent to the Hotel Operator less its fee. The Company is a re-renter of the
hotel room rented from Hotel Operator, is the hotel operator for purposes of
the tax, and is liable for taxes on the rent collected from the person.
EXAMPLE 4: VAC enters into
agreements with owners or tenants of owner-occupied, tenant-occupied, or
non-owner-occupied dwellings (including apartments, houses, cottages, or
condominiums) located in this State to list the dwellings on VAC's platform for
short-term rental. All dwellings are rented for less than 30 consecutive days
and are reserved in advance. OWNER lists a condominium on VAC's platform for
$500 per day. OWNER also charges an $80 fee for cleaning the condominium. A
person rents the condominium for 7 days. VAC charges and collects from the
person $3,500 for the condominium rental, $80 for the cleaning services, and a
$700 VAC service fee. It forwards $3580 to OWNER ($3500 rent + $80 cleaning
fee) and retains the $700 service fee. VAC does not have any Hotel Operator
Occupation Tax liability. OWNER is the operator for purposes of the tax and
has a Hotel Operator Occupation Tax liability on the $3580 received from VAC.
B)
If
the re-renter is headquartered outside of this
State and has no presence
in this State other than its business as a re-renter, conducted remotely, then,
subject to the provisions of
subsections (a)(8)(D) and (a)(8)(E)
, such
re-renter is the hotel operator for the purposes of the taxes under
subsections
(a)(1) and (a)(2)
if it meets one of the following thresholds:
i)
the
cumulative gross receipts from rentals in Illinois by the re-renter of hotel
rooms are $100,000 or more; or
ii)
the
re-renter of hotel rooms cumulatively enters into 200 or more separate
transactions for rentals in Illinois.
C)
A
re-renter of hotel rooms who is headquartered outside of this State and has no
presence in this State other than its business as a re-renter, conducted
remotely, shall determine on a quarterly basis, ending on the last day of
March, June, September, and December, whether
the re-renter
meets the
threshold of either paragraph
(i)
or (ii)
of
subsection
(a)(8)(B)
for the preceding 12-month period. If such re-renter of hotel
rooms meets the threshold of either paragraph
(i)
or (ii)
of
subsection (a)(8)(B)
for a 12-month period,
the re-renter
is
subject to tax under
the
Act and is required to remit the tax imposed
under
the
Act and file returns for the 12-month period beginning on the
first day of the next month after
the re-renter
determines that
the re-renter
meets the threshold of paragraph
(i)
or (ii)
of
subsection (a)(8)(B)
. At the end of that
12-month period, such re-renter of hotel rooms shall determine whether
the
re-renter
continued to meet the threshold of either paragraph
(i)
or
(ii)
of
subsection (a)(8)(B)
during the preceding 12-month
period. If
the re-renter
met the threshold in either paragraph
(i)
or (ii)
of
subsection (a)(8)(B)
for the preceding 12-month
period,
the re-renter
is a hotel operator in this State and is required
to remit the tax imposed under
the
Act and file returns for the
subsequent 12-month period. If, at the end of a 12-month period during which
such re-renter is required to remit the tax imposed under
the
Act, the
re-renter determines that
the re-renter
did not meet the threshold in
either paragraph
(i)
or (ii)
of
subsection (a)(8)(B)
during the preceding 12-month period,
the re-renter
shall subsequently
determine on a quarterly basis, ending on the last day of March, June,
September, and December, whether
the re-renter
meets the threshold of
either paragraph
(i)
or (ii)
of
subsection (a)(8)(B)
for the preceding 12-month period.
[35 ILCS 145/3(b-5)]
D)
A hotel operator who rents, leases, or
lets rooms subject to tax under
the
Act to a re-renter of hotel rooms
incurs the tax under
the
Act on the gross rental receipts it receives
from that re-renter of hotel rooms and cannot claim any resale exemption. In
such situations, the re-renter of hotel rooms incurs tax under
the
Act
on its gross rental receipts as provided in
subsections (a)(1) and (a)(2)
.
[35 ILCS 145/3-2]
E)
A re-renter of hotel rooms may take a
credit against the tax it incurs on the rental of a hotel room under
the
Act for the amount it paid under
subsection (a)(5)
to a hotel operator
as reimbursement for the tax incurred under
the
Act for the rental of
that room for the purposes of re-rental.
[35 ILCS 145/3-3]
EXAMPLE 1: Company rents a
downstate hotel room from Hotel Operator for $100. Hotel Operator charges the
Company $100 plus $5.98 to reimburse the Hotel Operator for its tax liability
under the Act. Company rents the hotel room to a guest and charges the guest
$150 plus $8.97 to reimburse the Company for its tax liability under the Act.
Hotel Operator must file a return and remit $5.98 in tax. The Company must
file a return and pay tax. The Company may take a credit for the $5.98 it paid
Hotel Operator. The Company must file a return and pay $2.99 in tax.
EXAMPLE 2: Company facilitates
the rental of Hotel Operator's downstate hotel room. Company rents the hotel
room to a guest and charges the guest $200 plus $11.96 to reimburse the Company
for its tax liability under the Act. Of the $211.96 collected from the guest,
Company passes on $100 to the Hotel Operator for the rental of the room. The
Company advises the Hotel Operator it will pay the tax on the entire amount it
receives from its customer and does not pass on $5.98 to reimburse the Hotel
Operator for its tax liability under the Act. Hotel Operator must file a
return and remit $5.98 in tax. Because the Company did not reimburse Hotel
Operator for its tax liability, it cannot take a credit for the $5.98 tax paid
by Hotel Operator. The Company must file a return and pay $11.96 in tax.
b) Scope of the Tax −
Examples of Taxability and Exemption
1) Since
the
hotel operators' occupation tax
is imposed
on receipts from renting rooms for living quarters, or for sleeping or
housekeeping accommodations, the tax does not apply to the receipts from the
renting of rooms for other purposes, such as for use as display rooms or sample
rooms, as meeting rooms, as offices or as private dining rooms.
2) Since
the tax is limited to the renting of rooms to the "public", a private
club that restricts its renting of rooms to its members and their guests would
not be liable for the tax on its rental receipts from those rooms.
3) Hotel
operators engaging in the business as a hotel operator renting rooms to the
public for use as living quarters, or for sleeping or housekeeping
accommodations, is subject to the tax even if the person paying for the room
may be a church (except as provided in subsection (c)(2)), charity
(except as provided in subsection (c)(3))
or school
or some other kind of nonprofit organization, and even if the person paying for
the room may be a governmental agency or instrumentality (federal, State or
local, or even a foreign government).
4) There
is no exemption simply because the lessor of the rooms is a nonprofit
organization, such as a church (except as provided in subsection (c)(2)),
charity
(except as provided in subsection (c)(3))
or
school. However, a college or other school is not subject to the tax on its
receipts from renting rooms to its students for use as living quarters or for
sleeping or housekeeping accommodations because this is not the renting of the
rooms to the "public". Nevertheless, if the school rents rooms for these
purposes to persons who are not enrolled with the school in courses of study
for credit, that renting is not being done to students, but is being done to
the "public", and the school incurs
hotel
operators' occupation tax
liability on its rental receipts from this
activity, if the lessees do not qualify as permanent residents.
5) Likewise,
the renting of rooms on a transient basis to the public for use as living
quarters or sleeping or housekeeping accommodations when the lessor is a
charitable organization, such as the Y.M.C.A. or the Y.W.C.A., is subject to the
hotel operators' occupation tax
.
6) If an
operator should make a separate and specific charge for the use of bedding or
other facilities furnished in connection with the use of a room as living
quarters or for sleeping or housekeeping accommodations, the operator's
additional receipts from this source are subject to the
hotel operators' occupation tax
. However, that tax does not
apply to the operator's receipts from selling food, beverages or other tangible
personal property, nor to receipts from the selling of tickets to theatre
performances or other similar activities, nor to other receipts that are not in
any way reasonably connected with or attributable to the renting, leasing or
letting of rooms for use as living quarters or for sleeping or housekeeping
accommodations; provided that exemption for nontaxable receipts cannot be
claimed unless supported by proper books and records as provided for in Section
4 of the Hotel Operators' Occupation Tax Act and in Section 480.115.
c)
Exemption from Hotel Operators' Occupation Tax
1) The
hotel operators' occupation tax
is not imposed upon
gross rental receipts for which the hotel operator is prohibited from obtaining
reimbursement for the tax from the customer by reason of a federal treaty
(Section 3 of the Act). Under the Vienna Convention, some foreign diplomats
are not required to pay reimbursement charges that are similar in nature to
taxes.
A) The
exemption for rentals to certain diplomatic personnel applies only to
diplomatic personnel possessing certain types of diplomatic tax exemption cards
issued by the U.S. Department of State, Office of Foreign Missions. There are 2
types of diplomatic tax exemption cards: personal tax exemption cards and
mission tax exemption cards.
Mission tax
exemption cards are used by foreign missions to obtain exemption from certain
taxes, including taxes on hotel stays and lodging, on purchases in the United
States that are necessary for the mission's operations and functions. The
Office of Foreign Missions is the only entity in the United States with legal
authority to authorize diplomatic and consular tax exemption privileges.
Foreign missions may not independently purport to authorize or otherwise
certify to a vendor or governing tax authority the availability of tax
exemption privileges for the embassy, its consular posts or members. A mission
tax card may not be used to exempt taxes on hotel or lodging expenses unrelated
to a mission's diplomatic or consular functions, such as those related to
tourism, medical treatment, or leisure travel. The exemption only applies if:
i) the
foreign mission holds a valid Mission Tax Exemption Card that allows for the
relief of such taxes;
ii) the
travel of the individuals described above is conducted in support of the
missions' diplomatic or consular functions; and
iii) the
lodging costs are paid for with a check, credit card, or wire transfer
transaction in the name of the foreign mission. Cash is not an acceptable form
of payment.
In addition, the American
Institute in Taiwan/Washington issues Mission Tax Exemption Cards and Personal
Tax Exemption Cards to officials of the Taipei Economic and Cultural
Representative Office. For examples of these cards, see 86 Ill. Adm. Code
130.Illustration A.
B) In
documenting this exemption, a hotel operator must obtain the mission's name,
the card holder's name, the exemption number, the expiration date, and a
photocopy of the diplomatic card.
2)
Effective
July 1, 2017, the Hotel Operators' Occupation Tax is not imposed upon gross
rental receipts received by an entity that is organized and operated
exclusively for religious purposes and possesses an active Exemption
Identification Number
(ExIN)
issued by the Department pursuant to the
Retailers' Occupation Tax Act when acting as a hotel operator renting, leasing,
or letting rooms:
A)
in
furtherance of the purposes for which it is organized; or
B)
to
entities that:
i)
are organized and operated exclusively
for religious purposes;
ii)
possess
an active
ExIN
issued by the Department pursuant to the Retailers'
Occupation Tax Act; and
iii)
rent
the rooms in furtherance of the purposes for which they are organized.
C)
No
gross rental receipts are exempt under
subsection(c)(2)
unless the hotel
operator obtains the active
ExIN
from the exclusively religious entity
to whom it is renting and maintains that number in its books and records.
D)
Gross
rental receipts from all rentals other than those described in
subsection
(c)(2)
are subject to the tax imposed by the Hotel Operators' Occupation Tax
Act, unless otherwise exempt under that Act.
[35 ILCS 145/3(d-5)]
EXAMPLE 1: A religious
organization is organized and operated exclusively for religious purposes and
has an active ExIN. It operates a retreat center and organizes and conducts a 3-day
marriage counseling seminar and rents rooms to the participants of the seminar.
The seminar is in furtherance of its organizational purposes. The receipts from
these rentals are not subject to the
hotel operators'
occupation tax
under subsection (c)(2).
EXAMPLE 2: Religious Organization
A is organized and operated exclusively for religious purposes and has an
active ExIN. It operates a retreat center and rents a block of rooms to
Religious Organization B. Religious Organization B is organized and operated
exclusively for religious purposes, possesses an active ExIN, and provides
rooms to the participants of a spiritual seminar it has organized and will
conduct. The seminar furthers the organizational purposes of Organization B.
Organization A's receipts from these rentals are not subject to the
hotel operators' occupation tax
under subsection (c)(2).
In this Example, if the rooms are paid for by the individual participants and
not by Organization B, Organization A must keep records demonstrating that the
individual to whom the room was rented was a participant in the seminar
conducted by Organization B. If Organization A does not keep these records,
the receipts from those rentals are taxable.
EXAMPLE 3: Religious Organization
A is organized and operated exclusively for religious purposes and has an
active ExIN. It operates a retreat center. Religious Organization A's
organizational documents demonstrate it is organized, in part, to partner with
school districts to provide one-on-one support to students to help them
overcome the educational and societal challenges they face both in and out of
school. Organization B is a not-for-profit organization that provides funds and
support to school districts that serve at-risk students. Religious Organization
A rents a block of rooms to Organization B for participants attending a seminar
conducted by Organization B for educators of at-risk youth. Because the
seminar conducted by Organization B is in furtherance of Organization A's
organizational purposes, the receipts from the rental to Organization B are not
subject to the
hotel operators' occupation tax
under subsection (c)(2). In this Example, Religious Organization A must keep
records demonstrating that the seminar was in furtherance of its organizational
purposes (e.g., a copy of its charter, mission statement, and by laws, as well
as any brochures or agendas pertaining to the seminar). In addition, if the
rooms are paid for by the individual participants and not by Organization B,
Religious Organization A must keep records demonstrating that the individual
was a participant in the seminar conducted by Organization B (e.g., a copy of
the seminar's sign-in sheet).
EXAMPLE 4: A religious
organization operates a retreat center, is organized and operated exclusively
for religious purposes, and has an active ExIN. It rents a block of rooms to
persons attending a wedding reception at the center or rents a block of rooms
to a not-for-profit organization that conducts a sports-medicine seminar. The
receipts from either of these rentals do not qualify for the exemption in
subsection (c)(2) because the rentals are neither made in furtherance of the
organizational purposes of the religious organization operating the retreat
center, nor made to a religious organization organized and operated exclusively
for religious purposes that has an active ExIN.
E) Records
i) When
a religious organization that has an active ExIN operates a retreat center,
conducts an event in furtherance of its organizational purposes, and rents
rooms to persons attending that event, the religious organization must obtain
and maintain the following: documents demonstrating the nature of the event
(e.g., brochures, pamphlets, or agendas of the event); documents demonstrating
how the rental of the rooms was in furtherance of its organizational purposes
(e.g., a copy of the religious organization's mission statement or charter);
and the dates of the room rentals.
ii) When
a religious organization that has an active ExIN operates a retreat center and
rents rooms to an entity organized and operated exclusively for religious
purposes with an active ExIN that conducts an event in furtherance of its
organizational purposes, the religious organization operating the retreat
center must obtain and maintain the following: the name, address, and phone
number or email of the renting religious organization conducting the event; the
renting religious organization's active ExIN; documents demonstrating the
nature of the event (e.g., brochures, pamphlets, or agendas of the event); a
certification that the room rentals were in furtherance of the organizational
purposes of the renting religious organization; the dates of the room rentals;
and any contracts between the retreat center and the religious organization
that rented the rooms.
iii) When
a religious organization that has an active ExIN operates a retreat center and
is not conducting an event at the center but rents to another organization that
conducts an event that furthers the organizational purposes of the retreat
center's religious organization, the religious organization operating the
retreat center must obtain and maintain the following: the name, address, and
phone number or email of the renting organization conducting the event;
documents demonstrating the nature of the event (e.g., brochures, pamphlets, or
agendas); a certification by the religious organization operating the retreat
center that the room rentals by the renting organization were in furtherance of
the retreat center's organizational purposes, and documents demonstrating how
the rental of the rooms was in furtherance of the retreat center's
organizational purposes (e.g., the retreat center's mission statement or
charter); the dates of the room rentals; and any contracts between the
religious organization operating the retreat center and the renting
organization conducting the event.
3) Effective
July 1, 2023, the Hotel Operators' Occupation Tax
shall not apply to gross
rental receipts received from the renting, leasing, or letting of rooms to an
entity that is organized and operated exclusively by an organization
chartered
by the United States Congress for the purpose of providing disaster relief and
that possesses an active Exemption Identification Number
(
ExIN
)
issued by the
Department
pursuant to the Retailers' Occupation Tax Act if the renting,
leasing,
or letting of the rooms is in furtherance of the purposes for which the exempt
organization is organized
. The American National Red Cross is an example
of an organization chartered by the United States Congress for the purpose of
providing disaster relief pursuant to 36 U.S.C. Ch. 3001. [35 ILCS
145/3(d-10)]
A) The
exempt chartered organization must make the payment itself for the renting of
the rooms. Cash payments are not allowed with the exemption. Acceptable
payment methods include:
i) use
of a credit card that is directly billed to the organization and is either in
its name only or in the organization's name and the name of a person authorized
to use it; or
ii) a
check drawn on an account belonging only to the organization; or
iii) use
of a purchase order from the organization that is billed to the organization.
B) To
qualify, the hotel operator must obtain and maintain from the organization:
i) documentation
that the renting, leasing, or letting of the room is associated with the
organization. Acceptable documentation includes a copy of an employee
identification badge; and
ii) a
copy of the active Illinois Exemption Number Certificate issued by the
Department. (Note: It is the operator's responsibility to verify that the
organization's ExIN is valid and active).
4) Such
tax is not imposed upon the
privilege of engaging in any business in Interstate Commerce or otherwise,
which business may not, under the Constitution and Statutes of the United
States, be made the subject of taxation by this State.
[35 ILCS 145/3(d)]
d) How to Compute
Applicable Tax Rate or Effective Date of New Tax
1) For
the purposes of the Hotel Operators' Occupation Tax Act, any tax liability
incurred in respect to the renting, leasing or letting of rooms in a hotel
shall be computed by applying, to the gross receipts from the renting, leasing
or letting, the tax rate in effect as of the date the lessee occupies a
specific room or rooms or becomes irrevocably liable to pay rent for the right
to occupy a specific room or rooms. Deposits paid in advance shall be deemed
to be received as rental receipts when the specific room or rooms to which the
deposit is applied as rent shall be deemed to be rented, leased or let within
the meaning of the preceding sentence.
2) Likewise,
when something that has been exempted becomes taxable as to room renting,
leasing or letting that occurs on or after some particular date, the date of
renting, leasing or letting for this purpose shall be deemed to be the date
when the lessee occupies a specific room or rooms or becomes irrevocably liable
to pay rent for the right to occupy a specific room or rooms.