Exemptions to Transient Occupancy Tax (TOT)
Section 8-2.604 of the Modesto Municipal Code states that no Transient Occupancy Tax shall be imposed upon:
- Any person as to whom, or any occupancy as to which it is beyond the power of the City to impose the tax herein provided:
- Any officer or employee of a foreign government who is exempt by reason of express provisions of federal law or international treaty.
- Any officer or employee of the United States Government, or of a federal credit union, or of a state, county, city or other domestic public entity who pays rent in the discharge of official government business.
- Any officer or employee of a bank or insurance company who pays rent in the discharge of official bank or insurance company business.
- Rent paid to any hospital, medical clinic, convalescent home or other temporary or permanent domicile equipped primarily for the care of aged or infirm people.
Any person, transient or operator upon whom the tax would not have been imposed by application of definitions in Section 8-2.602 as they were prior to this amendment.
No exception shall be granted except upon a claim therefore made at the time rent is collected and under penalty of perjury upon a form prescribed by the Tax Administrator.
"Transient" means any person who exercises occupancy or is entitled to occupancy by reason of concession, permit, right of access, license or other agreement for a period of twenty-seven (27) consecutive calendar days or less, counting portions of calendar days as full days. Any such person exercising occupancy shall be deemed a transient until the period of twenty-seven (27) days has expired unless there is an agreement in writing between the operator and the occupant providing for a tenure of greater than twenty-seven (27) days for compensation.
Typical Exemptions Not Allowed
Typical exemptions not allowed for non-profit employees or representatives.
Section 28 (f) or Article XII of the California constitution provides that insurance companies which are subject to the California Gross Premiums Tax are exempt from taxes (except real property taxes) imposed by municipalities and counties of California. In order to qualify for exemption from City's Transient Occupancy Tax, patron must pay hotel occupancy with insurance company check or credit card. Proof of such payment shall accompany exemption form submitted by the hotel/motel operator when reporting gross earnings.
For additional information regarding transient occupancy tax, please call 209-577-5389.
Examples of Transient Occupancy Taxability of Fees and Charges
Section 8-2.603 of the Modesto Municipal Code states each transient is subject to and shall pay a tax for the privilege of occupancy in any hotel. The tax is imposed at a rate of 9% of the rent charged by the hotel operator. Rent is the consideration, whether or not received, for the occupancy of space in the hotel, and is further defined in Section 8-2.602 of the Modesto Municipal Code.
Mandatory Fees and Charges
Any fee or charge directly related to sleeping accommodations and/or considered mandatory (for all guests) for the privilege of occupancy are considered “rent” and therefore taxable under the transient occupancy tax (TOT).
A fee does not become exempt from TOT merely by making it a separate line-item charge. Examples of fees and charges that qualify as part of the “rent” and subject to the TOT include:
- Basic room charges
- Resort fees
- Late and/or early check-in and/or check-out fees
- Cleaning fees
- Extra person(s) charges
- Pet fees
- Rollaway bed charges
- Cribs or playpen
- Mandatory parking fees and/or valet fees
- Room upgrade fee
Elected Fees and Charges
Any charge elected by the guest and unrelated to occupancy of the hotel is not taxable. Examples of fees and charges not considered part of rent and not subject to the TOT include:
- Laundry fees
- Parking fees
- Valet fees
- Amenity sales
- Damages caused by guests (for example: pets, smoke.)
- Optional cleaning fees
- Optional equipment fees (safe fees, microware fee, refrigerator fee, refundable deposits, and meeting room charges.)
- In-room service charges (for example: phone charges, internet fees, movie rental fees, meals)
- Day use pass fees (for the use of golf course, fitness fees, pool/spa heating fees, or other services not associated with the use of the room)
- Reservation fees
- No-Show fees
- Cancellation fees
- Attrition fees
- Forfeited deposit
Note: Not all taxable and non-taxable charges and fees are listed above. If any fees are not listed, please contact the City’s Business License Division. As new fees are established or changes to fees are implement by any hotel, it is important to reach out to the City’s Business License Division to determine if these fees should be considered taxable or non-taxable prior to charging these fees to hotel occupants.
Any fee or charge that meets the definition of Rent contained in Section 8-2.602 of the Modesto Municipal Code is subject to the TOT, regardless of whether the fee or charge is listed above.
If you have any further questions about whether a fee or charge is subject to the TOT, please contact the City’s Business License Division at 209-577-5389.