Montana Administrative Register Notice 42-2-848 No. 22   11/26/2010    
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                                                    BEFORE THE DEPARTMENT OF REVENUE



In the matter of the adoption of New Rules I (42.14.113) and II (42.14.205); amendment of ARM 42.14.101, 42.14.106; amendment and transfer of 42.14.102 (42.14.302), 42.14.103 (42.14.303), 42.14.104 (42.14.304), 42.14.105 (42.14.202), 42.14.107 (42.14.203), 42.14.108 (42.14.204), 42.14.109 (42.14.206), and 42.14.110 (42.14.207); and repeal of 42.14.111 relating to lodging facility use taxes and sales taxes














TO:  All Concerned Persons


1.  On September 23, 2010, the department published MAR Notice No. 42-2-848 regarding the proposed adoption, amendment, amendment and transfer, and repeal of the above-stated rules at page 2184 of the 2010 Montana Administrative Register, issue no. 18.


2.  A public hearing was held on October 26, 2010, to consider the proposed adoption, amendment, amendment and transfer, and repeal.  Oral and written comments received at the hearing and subsequent to, are summarized as follows along with the department responses:


COMMENT NO. 1:  Thirty consecutive days - Mr. Mike Mergenthaler, Helena Chamber Conventions and Visitors Bureau, would like to know how the thirty consecutive days applies with different contracts, such as Montana Rail Link (MRL), where they guarantee a number of rooms per night for a month for use by their crew, but it might not be the same individual in the room each night, and seeks clarification on how this works in months with holidays such as Thanksgiving and Christmas, when the rooms are occupied for most of the month, but the occupant level drops off for those couple of days.


RESPONSE NO. 1:  The department wants to thank Mr. Mergenthaler for his participation in this rules process.  A response to his question was provided during the hearing and is recapped as follows:  If an entity or an individual pays for a room for 30 consecutive days, the entity or individual that rented the room is exempt from paying the lodging facility sales and use tax.  If the room is not paid for by an entity or an individual for 30 consecutive days, regardless of a contract between the parties, the room is not exempt for either tax.  In addition, Montana statutes do not provide for any latitude in regard to the consecutive 30 days exemption for the holidays.


COMMENT NO. 2:  Dormitory exemption - Mr. Stuart Doggett, Executive Director, Montana Lodging and Hospitality Association, provided additional written comments related to ARM 42.14.103, and the language about the user of a dormitory not being required to pay the lodging facility sales and use tax.  Mr. Doggett questioned whether the proposed rule change is only seeking to clarify that if a dormitory operator charges less than 60 percent of the allowable state rate, then they don't have to collect accommodation taxes; not that they are exempt from collecting the taxes required of other lodging facilities.  The association wants dormitories to follow the same guidelines as lodging facilities.


RESPONSE NO. 2:  The department appreciates Mr. Doggett's comments and assistance during this rulemaking process.  The language in ARM 42.14.103 provides for situations where an occupant or user is not required to pay the lodging facility sales and use tax.  These situations, all of which involve an educational purpose, are preexisting language and have not been changed in this rule proposal.  The department has no intention of changing past practice regarding this issue.  A dormitory is not included in the list of facilities defined in 15-65-101, MCA, or accommodations defined in 15-68-101, MCA, as exempt when their average daily accommodations charge is less than 6 percent of the actual cost of lodging as authorized under 2-18-501, MCA.  The only facilities that do qualify for the ADAC exempt include hotels, motels, hostels, public lodginghouses, or bed and breakfast facilities.

This issue is further stated in ARM 42.14.302.


COMMENT NO. 3:  Expansion of tax base - Ms. Mary Whittinghill, Executive Director, Montana Taxpayers Association; Mr. Arthur Sackler, Director, Interactive Travel Services Association; and Mr. Stuart Doggett, Executive Director, Montana Lodging and Hospitality Association, all expressed concern that the department is improperly expanding the tax base, including internet intermediaries, for the lodging facility/lodging facility sales and use tax.  Ms. Whittinghill specifically commented that the proposed rules appear to run counter to legislative policy and should not be adopted.


RESPONSE NO. 3:  The department wishes to thank Ms. Whittinghill, Mr. Sackler, and Mr. Doggett for their time and attention regarding this rulemaking process.  The rules do not expand the tax base and/or target internet intermediaries or change their tax responsibilities.  The rules explain current practice and alert those entities who have a responsibility to collect and remit the lodging facility/lodging facility sales and use tax to the department.


COMMENT NO. 4:  Responsibility of travel agencies - Mr. Jon Bennion, Government Relations Director, Helena Chamber of Commerce, asked whether the proposed rules would require travel agents to collect and remit the lodging facility/lodging facility sales and use tax to the department.


RESPONSE NO. 4:  The new rules would not require any new filings or additional administrative burdens for the travel agencies.  The rules do not change the department's established practices with regard to the travel agencies as commonly understood.


COMMENT NO. 5:  Adoption of the rules - Ms. Whittinghill comments that the proposed rules, as drafted, are confusing, contain improper blending of the two taxes, and are beyond the scope of the department's authority to implement, and requests that the department include the following in the response to the comments:  Ms. Whittinghill further asked, if adopted, what would be the effective date of the rules?  Would they be retroactive?  Would they apply to in-state travel-related businesses, such as travel agents and others?  Are they intended to require businesses that are not owners or operators of hotel facilities to collect both the lodging tax and the sales tax?

Mr. Sackler also urged "thoughtful reconsideration of the draft rules, and either revision to conform to the limits of the law, or withdrawal of the draft rules."


RESPONSE NO. 5:  The effective date of the rules is the date after publication by the Secretary of State per the Montana Administrative Procedure Act (MAPA).  The department believes there is no need for a separate or different effective date from the MAPA date because these rules describe how the department has administered these two taxes since the implementation of Title 15, Chapter 68, MCA.  In implementing the Sales Tax in 2003, the department combined both Chapters 65 and 68 of Title 15, MCA, into one tax return that provided the owner/operator or seller to manage the collection of the tax from the user as one tax, thus simplifying their reporting requirements.

The department interprets retroactive rules as the changing of a certain practice to periods that have already passed.  The rules are not retroactive as the rules describe current and past practice and according to MAPA rules can only apply prospectively without specific statutory authority granting retroactive applicability.

In response to the question of whether the rules would apply to travel agents or businesses that are not owners or operators of hotel facilities, please refer to our response to Comment No. 4.

In response to the adoption of the rules, the department believes there is no reason to delay the implementation of the rules as the rules clearly state the entities' responsibilities for collecting and remitting lodging facility sales and use taxes.


3.  As a result of the comments received the department amends and transfers ARM 42.14.203, and 42.14.204 with the following changes:


42.14.107 (42.14.203)  COLLECTING, REPORTING, AND PAYING THE TAX  (1)  A seller of a lodging unit located in Montana must collect the lodging facility sales and use tax, rounded to the nearest dollar, from the user and file a return with the department as required in ARM 42.14.107 this rule, except for a seller exempt under ARM 42.14.103 42.14.303 and for sales exempt under ARM 42.14.104 42.14.304.

(2) through (6) remain as proposed.


AUTH:  15-65-102, 15-68-502, 15-68-801, MCA

IMP:  15-1-208, 15-65-112, 15-65-115, 15-68-502, 15-68-513, MCA


42.14.108 (42.14.204)  PENALTIES AND INTEREST  (1) remains as proposed.


AUTH:  15-65-102, 15-68-801, MCA

IMP:  15-1-206, 15-65-115, 15-68-514, MCA


4.  Therefore, the department adopts New Rule I (42.14.113), and New Rule II (42.14.205), amends ARM 42.14.101, 42.14.106, amends and transfers ARM 42.14.102 (42.14.302), 42.14.103 (42.14.303), 42.14.104 (42.14.304), 42.14.105 (42.14.202), 42.14.107 (42.14.203), 42.14.108 (42.14.204), 42.14.109 (42.14.206), and 42.14.110 (42.14.207), and repeals ARM 42.14.111 as proposed.


5.  An electronic copy of this adoption notice is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes."  The department strives to make the electronic copy of this adoption notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered.  In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.



/s/ Cleo Anderson                                         /s/ Dan R. Bucks

CLEO ANDERSON                                      DAN R. BUCKS

Rule Reviewer                                               Director of Revenue


Certified to Secretary of State November 15, 2010


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