Filed under: State Local & Multistate Tax

Washington cities and counties are permitted to establish parking and business improvement areas (PBIAs) and levy assessments on the businesses that are benefitted by PBIA activities. Seattle has one such PBIA known as the Seattle Tourism Improvement Area. Lodging businesses within the PBIA collect a charge from guests to fund improvement area assessments.

In 2019, the Department of Revenue audited a Seattle hotel and concluded that the assessments billed to guests should be included in the amount subject to sales and business and occupation (B&O) taxes. In response, members of the Washington Hospitality Association approached legislators seeking a legislative fix to make clear that the amounts charged by lodging businesses for the assessments are not subject to sales or B&O tax.

This legislative fix, ESHB 1512, excludes from the measure of both the sales tax and B&O tax amounts collected from guests for PBIA assessments. To be excludable, the amounts must be separately stated from the room rate on the guest folio or other invoice provided to the guest. According to the bill, a lodging business is deemed to be collecting the assessment from its guests as agent for the PBIA levying the special assessment and is not part of the taxable selling price. The bill is retroactive in effect, but taxes lawfully paid prior to enactment are not eligible for refund.

ESHB 1512 was delivered to the Governor on April 22nd; he has 20 days to sign the bill.

If you have any questions regarding this article or any other state or local tax matter, contact the author or any member of the Clark Nuber State and Local Tax practice.

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