Ruling 2005-4, Sales and Use Taxes/Room Occupancy Tax/Community Antenna Television Services

A company (hereinafter the “Company”) that contracts with hotels to provide in-room, pay-per-view movies (hereinafter “PPV”) has asked for guidance on the sales and use taxes and room occupancy tax obligations associated with its services. 

To deliver its PPV services, the Company installs a central control unit in hotels that contract with the Company.  The Company owns and maintains the central control unit.  The central control unit contains either a rack of video cassette players or digital file servers that store movies among which guests may choose. 

Hotel guests may use interactive, computer-controlled television sets in their hotel rooms to choose PPV movies from a menu that identifies the Company as the vendor of the movies using a remote control device that belongs to the Company.  Cables connect each hotel room television to the central control unit.  When a hotel guest makes a PPV selection, a signal goes to the central control unit.  The central control unit plays the selected movie by sending the signal from the central control unit through the cables to the guest’s hotel room TV. 

The Company determines the PPV offerings at each hotel and sets the prices for each PPV movie.  The Company has no written contracts with individual hotel guests.

The Company plans to install credit card readers in hotel rooms to allow guests to pay for their PPV selections directly by credit card.  A guest will pay for a movie selection by swiping a credit card in an in-room credit card reader owned by the Company.  The charge will appear on the guest’s credit card bill, and no PPV charges will appear on the guest’s hotel bill.  The Company will pay a commission to the hotel based on a percentage of all proceeds the Company collects from its PPV movie sales.

ISSUE:

What sales tax and room occupancy tax liabilities exist when hotel guests pay for PPV services using an in-room credit card reader instead of making payment for such services to the hotel?

DISCUSSION:

The Department has previously ruled that in-room movie services similar to the Company’s PPV services are taxable “community antenna television services” (hereinafter “CATV”) as defined in Conn. Gen. Stat. §12-407(a)(27).  See Ruling No. 95-6.

When a hotel guest charges the PPV fees to the guest’s credit card using the in-room credit card reader, the guest is the consumer of the PPV service and is liable for the six percent sales and use taxes on such service.  The Company, as the retailer of the service, must collect and remit the tax on its sales of PPV services to guests in Connecticut hotels and lodging houses.

The room occupancy tax applies to the transfer for consideration of the occupancy of a room or rooms in a hotel or lodging house for 30 consecutive days or less.  Consideration includes charges for the services and accommodations accompanying the use and possession of the room or rooms, whether or not charges for the services or accommodations are separately stated by the hotel or lodging house.  Conn. Gen. Stat. § 12-407(a)(2)(H); see also Policy Statement 2003(1), Application of Sales and Use Taxes and the Room Occupancy Tax to the Hotel and Motel Industry.

No room occupancy tax applies when a hotel or lodging house guest charges the PPV fees to the guest’s credit card using the in-room credit card reader, because the transaction is made directly between the Company and the guest. 

RULING:

When a guest at a Connecticut hotel or lodging house pays a vendor other than the hotel or lodging house for pay-per-view services by credit card at the time of service using an in-room credit card reader owned by the vendor of the pay-per-view services, the guest is the consumer of a community antenna television service and is liable for the six-percent sales and use tax.  No room occupancy tax liability exists in this transaction.

LEGAL DIVISION

December 14, 2005