TAX NEWS - January 2010

Sales/Use Tax - New York: Rewards program reimbursements to hotel owners are not taxable

In the Matter of Marriott International, Inc., N.Y. Tax App. Trib. (1/14/10). The New York Tax Appeals Tribunal affirmed that reimbursements paid or credited to various hotel owners for participation in the franchisor's "Marriott Rewards" marketing program that was designed to reward customer members who frequently stayed at participating hotels were not subject to state sales/use tax, because these reimbursements did not constitute consideration for hotel occupancy. Under the facts, the program did not pay participating hotels each time a room was provided to a member. Similarly, the participating hotels did not receive an identifiable payment for every room provided under the program.

The reimbursement amount did not equal the hotel's actual charges for providing a specific hotel room or the hotel's cost of providing a particular room to a member. In fact, the hotel received the same amount whether the member was given a single room or a suite, or whether the hotel was busy or slow. In this respect, the reimbursements from the program to the participating hotels did not entitle the program the right to occupy a room or the right to distribute a room. Therefore, the reimbursements were not consideration for hotel occupancy.