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DRS Rules on Hotel Room Rentals Received by Non-Profit Hospitals

February 3, 2012

The Connecticut Department of Revenue Services has ruled that Connecticut’s Room Occupancy Tax does not apply to hotel room rentals received from certain guests, referred to as “Priority Guests”, staying in a hotel operated by a non-profit hospital. Priority Guests are patients, patients’ families, visiting medical personnel and recruitment candidates whose stays are associated with the exempt purpose of the hospital. However, the Hotel Occupancy Tax does apply to hotel room rent received from guests who are members of the general public, other than Priority Guests. The Room Occupancy tax is a 15% sales tax that applies to hotel room rental receipts.

Importantly, the ruling does not address the myriad of other tax issues that would arise from the rental of rooms to the general public including, the application of the tax on unrelated business taxable income (and whether the exemption for rental income would apply), the applicability of the exemption from sales and use tax if property is not to be used exclusively in furtherance of exempt purposes, and the potential loss of tax-exempt status for the property for purposes of the municipal property tax.

If you have any questions about this alert, please contact Ray Casella at


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