Taxpayer believes that the room rentals in question are exempt under either IC § 6-2.5-5-16, IC § 6-2.5-5-24, or IC § 6-2.5-5-25, since the hotel guests were federal government employees or were members of exempt organizations. Taxpayer states that these guests presented exemption certificates supporting their claim of exemption. However, as explained by the two Information Bulletins referenced above, sales to the exempt organizations are direct sales to the exempt organizations, not to the members. IC § 6-2.5-5-16, IC § 6-2.5-5-24, and IC § 6-2.5-5-25 all provide that the relevant exemptions apply to sales to the organizations, not individuals. If the individuals pay for the rooms, those transactions are then between the hotel and the individual. Even if the exempt organization or government later reimburses the individual, the initial transaction was between the hotel and a non-exempt person.
Therefore, each exempt hotel room rental consists of two steps. The first step is to present a properly completed exemption certificate. The second step is to present payment by the exempt organization or governmental organization and confirm that the exemption certificate is actually being used by the exempt organization listed on the exemption certificate. Both steps are necessary and are immediately verifiable. These steps are verifiable by any retail merchant, including but not limited to hotels. The Department has issued clear guidance on the treatment of the transactions at issue pursuant to the above mentioned statutes and regulations.
Taxpayer's documentation includes copies of exemption certificates (Form ST-105s), which were provided by its hotel guests. However, upon reviewing Taxpayer's documentation, majority of its hotel guests at issue selected the box of "Sales to nonprofit organizations claiming exemption pursuant to Sales Tax Information Bulletin 10." The same exemption certificates also expressly contain the language of "(May not be used for personal hotel rooms and meals.)," informing both Taxpayer and its hotel guests that "personal hotel rooms" are not exempt transactions. While some hotel guests at issue claimed to be the federal government employees, Taxpayer did not provide documentation demonstrating that the federal government paid the hotel room rental directly.
Thus, given the totality of the circumstances, in the absence of other documentation, the Department is not able to agree that Taxpayer has met its burden showing that the transactions were indeed exempt. Therefore, the Department's audit properly imposed sales tax on these transactions.
