State Tax Day - Current, S.9, Virginia—Sales and Use Tax: Taxability of Hotel Credit Card and Cancelation Fees Discussed, (Jun 22, 2026)

A hotel’s separately itemized credit card fees for group events, banquets, and catering services are subject to Virginia sales and use tax. Here, the true object of the room rental transactions is the provision of taxable accommodations. The true object of the banquet and catering services is the taxable charge for the sale of food. Thus, the credit card fee the hotel intends to impose with the sale of accommodations and events is subject to tax. In addition, cancellation fees incurred by group event customers and transient guests are generally not subject to tax. Cancellation fees are not considered to be an additional room charge because the customer is not charged for the room and has no right of possession. Thus, in general, the fee for canceling transient reservations is not subject to the tax. However, there are situations in which such fee is subject to tax. The hotel should review the terms of its contract with its customers. If the contract does not hold customers liable for sales tax upon cancellation, then no sales tax should be collected. If the contract requires payment of sales tax in the event of cancellation, then sales tax should be collected and remitted.

Ruling of Commissioner, P.D. 26-24, Virginia Department of Taxation, May 11, 2026, ¶207-268