PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

This is a consensus rule making to amend section 527.9 of Title 20 NYCRR.

Elimination of the one-week stay test to determine nontaxable occupancy of bungalows and similar living units.

To conform the regulations to current statutory interpretation concerning sales tax on hotel occupancy.

Section 1. Subparagraph (iii) of paragraph (1) of subdivision (b) of section 527.9 of the regulations is amended to read as follows:

(iii) [maid] housekeeping, linen, or other customary hotel services are provided for occupants; and

Section 2. Subparagraph (i) of paragraph (7) of subdivision (b) of section 527.9 of the regulations is amended to read as follows:

(i) "Rent" is the consideration received for hotel occupancy valued in money, whether received in money or otherwise. The term "rent" includes charges for accommodations, services, facilities, amenities, and items that are incidental to the occupancy of the room or rooms, whether those charges are separately stated or included as one sum in the rate for the room or rooms. This includes, but [it] is not limited to, charges for the use of furnishings and equipment; charges for [maid] housekeeping service, towel and linen service, local telephone service (not billed on a per-call basis); and other similar incidental charges. See, also, subdivision (i) of this section concerning miscellaneous transactions.

Section 3. A new cross-reference is added to follow subparagraph (vi) of paragraph (8) of subdivision (b) of section 527.9 of the regulations to read as follows:

Section 4. Paragraph (5) of subdivision (e) of section 527.9 of the regulations is amended to read as follows:

(5) Bungalows and similar living units. [(i)] A bungalow or similar furnished living unit limited to a single-family occupancy is not a hotel provided[:

"(a)"] no [maid] housekeeping, food, or other common hotel services, such as entertainment or planned activities, are provided by the lessor[; and

"(b)" the rental is for at least one week].

[(ii)] The furnishing of linen by the lessor without the service of changing the linen does not alter the nontaxable status of any rental charges.

John W. Bartlett, Tax Regulations Specialist 4, Department of Taxation and Finance, Taxpayer Guidance Division, Building 9, W.A. Harriman Campus, Albany, NY 12227, (518) 457-2254, email: [email protected]

Same as above.

45 days after publication of this notice.

The Department of Taxation and Finance has determined that no person is likely to object to the adoption of this rule as written because it merely repeals a regulatory provision that is no longer applicable to any person and makes related clarifying and technical changes. The rule updates certain provisions in section 527.9 of the Sales and Use Taxes Regulations concerning the sales tax on hotel occupancy.

The rule repeals the at least one-week stay requirement that was a component part of the longstanding test for nontaxable bungalow occupancy contained in section 527.9(e)(5) of the regulations. The test is used to determine whether the rental of a bungalow or similar living unit constitutes the rental of hotel occupancy, which is subject to sales tax, or the rental of real property, which is not subject to sales tax. On June 2, 2011, a Division of Tax Appeals Administrative Law Judge found the one-week stay component of the test to be invalid. The Department did not take exception to this determination and decided to accept the ALJ’s conclusion. This change was announced in TSB M 12(4)S, Elimination of One-Week Stay Test to Determine if the Rental of a Bungalow or Similar Living Unit is Subject to Sales Tax. As noted in TSB M 12(4)S, the regulations are now being amended to conform to this position by eliminating the one-week stay requirement contained in the regulations.

The rule also makes clarifying changes in section 527.9 of the regulations to delete the gender-specific term “maid,” and a technical change to acknowledge, by the addition of a new cross-reference, that amendments to the Tax Law were made in 2010 which affect the application of sales tax on rent received for hotel occupancy by room remarketers (Chapter 57 of the Laws of 2010). These changes are non-controversial in nature.

A Job Impact Statement is not being submitted with this rule because it is evident from the subject matter that the rule will have no impact on jobs and employment opportunities. The purpose of the rule is simply to repeal a regulatory provision that is no longer applicable to any person and to make related clarifying and technical changes in section 527.9 of the Sales and Use Taxes Regulations concerning the sales tax on hotel occupancy. Accordingly, a job impact statement is not required for this rulemaking.

The rule repeals the at least one-week stay requirement that was a component part of the longstanding test for nontaxable bungalow occupancy contained in section 527.9(e)(5) of the regulations. The test is used to determine whether the rental of a bungalow or similar living unit constitutes the rental of hotel occupancy, which is subject to sales tax, or the rental of real property, which is not subject to sales tax. On June 2, 2011, a Division of Tax Appeals Administrative Law Judge found the one-week stay component of the test to be invalid. The Department did not take exception to this determination and decided to accept the ALJ’s conclusion. This change was announced in TSB M 12(4)S, Elimination of One-Week Stay Test to Determine if the Rental of a Bungalow or Similar Living Unit is Subject to Sales Tax. As noted in TSB M 12(4)S, the regulations are now being amended to conform to this position by eliminating the one-week stay requirement contained in the regulations.

The rule also makes clarifying changes in section 527.9 of the regulations to delete the gender-specific term “maid,” and a technical change to acknowledge, by the addition of a new cross-reference, that amendments to the Tax Law were made in 2010 which affect the application of sales tax on rent received for hotel occupancy by room remarketers (Chapter 57 of the Laws of 2010).