2022 Senate Bill 651 and House Bill 518 (2022 Acts of Assembly, Chapters 640 and 7) modify the procedures for collecting and remitting the Retail Sales and Use Tax and local transient occupancy taxes for accommodations sales involving accommodations intermediaries. In addition, the 2022 legislation directed the Department of Taxation ("the Department) to convene and facilitate a work group of stakeholders to examine the processes currently used to collect local transient occupancy taxes and make recommendations for improving the efficiency and uniformity of those processes. See Appendix A.

Prior to September 1, 2021, local transient occupancy taxes were not imposed on accommodations fees charged by accommodations intermediaries as part of room rental transactions. 2021 Senate Bill 1398 (2021 Acts of Assembly, Special Session I, Chapter 383) changed this treatment by providing that, effective September 1, 2021, local transient occupancy taxes collected on the sales of transient accommodations were required to be calculated based on the total charges or the total price paid for use or possession of the transient lodgings, including any fees charged by accommodations intermediaries for the facilitation of transactions for the provision of transient accommodations. Senate Bill 1398 specified that, in such transactions, the intermediary is generally deemed the dealer for the transaction and required to collect the local transient occupancy taxes on accommodations transactions. Such local transient occupancy taxes must then be remitted to the locality.

In cases where the accommodations were at a hotel, the accommodations intermediary was required to remit the portion of the local transient occupancy taxes attributable to the fee charged by the intermediary to the applicable locality and to remit the remainder of the tax collected to the hotel. The hotel was then required to remit the remaining amount to the locality. The Department issued Guidelines for the Application of the Retail Sales and Use Tax to Sales of Accommodations Facilitated by Accommodations Intermediaries to provide guidance regarding the 2021 legislation.

Effective October 1, 2022, the 2022 legislation changes the process by which local transient occupancy taxes are collected for transactions involving accommodations intermediaries. The legislation also broadens the definitions of "accommodations intermediary" and "room charge" for purposes of those taxes. While the legislation still requires accommodations intermediaries to collect the taxes, intermediaries are no longer required to return any portion of the taxes collected to the accommodations provider and instead must remit all of the taxes collected to the appropriate locality. The legislation also requires intermediaries to submit to a locality each month the property addresses and gross receipts for all accommodations facilitated by the intermediary in such locality. The Department has issued 2022 Guidelines for the Application of the Retail Sales and Use Tax to Sales of Accommodations Facilitated by Accommodations Intermediaries to provide guidance regarding the 2022 legislation.

As required by 2022 Senate Bill 651, the work group is comprised of the following members:

• One representative of the Commissioners of the Revenue
• One representative of the Treasurers
• One representative of the counties
• One representative of the cities and towns
• Two representatives of the hotel industry, and
• Two representatives of the accommodations intermediaries

The Department contacted the stakeholder groups identified in the legislation to notify them of the work group and to request that each stakeholder group appoint a representative to participate in the work group.

The initial teleconference meeting of the work group was held on August 8, 2022. The second teleconference meeting was held on September 8, 2022. Following the second meeting, the Department circulated a draft report for written comment. All comments received from the work group are attached. This is the final report of the work group.

The work group identified the following areas of consensus:

1. In order to improve the efficiency and uniformity of the collection and remittance of local occupancy taxes, a uniform occupancy tax return should be created.

2. The due dates for the return should be unified or significantly streamlined. Although localities that currently require a monthly filing were not amenable to moving to a quarterly filing basis, localities that currently require a quarterly filing would be willing to move to a monthly filing basis. The due date in most localities is the 20th of the month, which is consistent with the state sales tax return due date.

3. The work group was supportive of a model ordinance for localities to use in implementing the new return and due date. CORA has developed such a model ordinance.

4. Local governments, the accommodations intermediary industry, and any other interested parties should continue to work together to make the local taxation of transient accommodations as efficient as possible.

The work group failed to come to a consensus regarding the development of a centralized portal for remittance of local transient occupancy taxes. Given opposition to mandates on local governments and scarcity of funding, local officials and the industry trade groups representing hotels, motels, and other traditional providers of accommodations expressed that localities should not be required to develop or participate in the creation or operation of a centralized portal for remittance of occupancy taxes. They expressed that they did not want to discuss this issue as part of the work group discussions. Travel intermediaries strongly disagreed with this view and expressed that they felt this issue warranted further discussion or at least consideration of the merits of the portal separate from the issue of how to fund its creation.

In addition, the work group failed to reach consensus regarding proposed audit simplification measures or the enforceability of the monthly requirement to report the property addresses and gross receipts for all accommodations facilitated by an intermediary within a particular locality.