Does the hotel tax apply to property rentals of less than 30 days?

Douglas K. Marsico, Esq.

Most leases entered into between a landlord and tenant, whether written or verbal, call for a minimum of a month-to-month tenancy.

If the tenant asks for a week-to-week or even day-to-day term, a landlord should consider whether the obligation to collect and pay taxes on the income justifies acquiescing. The Department of Revenue recently published a warning that Pennsylvania’s hotel tax is applicable for lease terms of less than 30 days.

Pennsylvania’s hotel occupancy tax imposes a 6 percent tax of the rent upon every occupant of a room in a "hotel" in Pennsylvania. A hotel is broadly defined as a building in which the public may obtain sleeping accommodations, including establishments such as inns, hotels, tourist homes, tourist houses or courts, lodging houses, rooming houses, summer camps, apartment hotels, resort lodges and cabins and other building or group of buildings in which sleeping accommodations are available to the public for periods of time less than 30 days.

The tax is imposed only upon occupants, not upon "permanent residents" who are exempt from the tax. In order to be a permanent resident, a person must occupy the property, or have the right to occupy the property, for 30 consecutive days or more.

Based upon the broadness of the definition of "hotel," landlords should be cautious about entering into leases with terms of less than 30 days because the Department of Revenue is currently taking the position that such transactions trigger the obligation for the landlord to assess the hotel tax against the tenant, and remit payment to the state. As with other real estate-related taxes, in addition to the 6 percent statewide tax, many counties have an additional local hotel tax that must be remitted.

Does the hotel tax apply on a pre-possession lease for less than 30 days? I would argue that it does not since the house would not fall within the definition of a hotel. The house is not a building in which the public may obtain sleeping accommodations. However, would the Department of Revenue agree?

Mr. Marsico is an attorney with Caldwell & Kearns which serves as general counsel to PAR. A portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline.