Tax and Revenue Administration Tourism Levy Act Information Circular TL-1R3

TL-1R3 / January 2010

ALBERTA TOURISM LEVY ACT INFORMATION CIRCULAR:
OVERVIEW OF TOURISM LEVY ACT

NOTE: This information circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this information circular and governing legislation, the legislation takes precedence.

This information circular provides an overview of the Tourism Levy Act and its regulations. The topics discussed are:

• Tourism Levy
• The "More than Three Bedrooms Available for Rent" Rule
• Exemptions
  • Lodging Purchased and Used by the Government of Canada
  • Lodging Provided on an Indian Reserve
  • Work Camps
• Levy Collected, Exemptions Later Established
• Calculation of Tourism Levy

Tourism Levy

1. For the current tourism levy rate or previous hotel room tax rate, see Alberta Current and Historic Tax Rates.
   
   
2. The tourism levy applies to the purchase price of accommodation, excluding the cost of meals and other services, paid for after March 31, 2005. The levy is collected at the time of purchase.
   
   
3. The tourism levy is collected on all accommodation provided for consideration in a hotel, motel, apartment building, hostel, lodging house, boarding house, bed and breakfast, club or similar establishment in Alberta. The levy applies whenever four or more bedrooms are available for rent separately at the same time at the same location. For more information see the “More than Three Bedrooms Available for Rent” Rule.
   
   
4. The tourism levy also applies to lodging acquired with a prepaid vacation package. A “prepaid vacation package” is any transaction in which an operator agrees to sell or otherwise provide accommodation without a fee simple interest in real property to a purchaser at a future date or dates. This form of accommodation includes time-share unit rentals and vacation points.
   
   
5. The tourism levy is also charged on deposits made to secure accommodation, even if the accommodation is later cancelled and the deposit forfeited. Where an operator returns the deposit to the purchaser, no levy is payable. The process for an operator to obtain a refund of the tourism levy already submitted is explained in Information Circular TL-2, Responsibilities of Operators Providing Accommodation.
   
   
6. The tourism levy may apply even if money is not paid for the accommodation (see “Calculation of the Tourism Levy”).

The "More than Three Bedrooms Available for Rent" Rule

7. The “more than three bedrooms available for rent” rule most often applies to bed and breakfast, cabin, hostel, and prepaid vacation package operations.
   
   
8. The tourism levy must be collected whenever four or more bedrooms are available for rent separately at the same time at the same location. Whether or not the rooms are, in fact, rented is not the determining factor, but whether they are available for rent.
   
   
9. A bed and breakfast or similar establishment with three bedrooms available for rent separately is not subject to the tourism levy. However, if one or more additional bedrooms become available for rent, then all of the bedrooms are subject to the Tourism Levy. For example, if:
   
   
   • three bedrooms are available for rent on Monday – the tourism levy would not apply to any of the bedrooms.
   • on Tuesday and Wednesday a fourth bedroom is made available for rent (for example, the operator makes his/her own bedroom available), then the tourism levy applies to all rooms rented on Tuesday and Wednesday, whether or not the fourth bedroom is actually rented to someone.
     
     
10. Cabins may also be subject to the tourism levy. If four or more bedrooms are available for rent separately at the same location, for instance, in an establishment where there are two cabins and each cabin contains two bedrooms available for rent separately, then the tourism levy applies.
    
    
11. An establishment that rents individual beds in a bedroom or dormitory and has four or more bedrooms or dormitories available for rent separately must charge the tourism levy on the rental of each bed. The number of individual beds for rent in each bedroom or dormitory is not relevant in determining whether or not an establishment is subject to the tourism levy.
    
    
12. If an establishment will be required to collect the tourism levy when a fourth bedroom becomes available for rent, the operator must register with Tax and Revenue Administration (TRA) (see the “Registration” section in Information Circular TL-2, Responsibilities of Operators Providing Accommodation).

Exemptions

13. The tourism levy does not apply to lodging:
    
    
    • occupied by the same individual continuously for a period of 28 days or more.
    • in an establishment (location where lodging is provided) with fewer than four bedrooms available for rent separately (see the “More than Three Bedrooms Available for Rent” Rule section).
    • that is a room or rooms without beds, used for displaying merchandise, holding meetings, receptions, or entertaining.
    • in a social care facility, nursing home, or hospital.
    • provided by a registered charity as defined in the Income Tax Act (Canada) . However, lodging in an establishment owned, or operated, by a registered charity in connection with a course of instruction is subject to the tourism levy.
    • provided to an employee by an employer, where the employer is not in the business of selling lodging in an establishment owned or managed by, or on behalf of, the employer.
    • purchased and used by the Government of Canada (see “Lodging Purchased and Used by the Government of Canada”).
    • purchased and used by diplomatic representatives or the armed forces of foreign nations.
    • provided on an Indian reserve and purchased and used by an Indian or Indian band presenting a valid identification card at the time of purchase (see “Lodging on an Indian Reserve”).

14. Where the accommodation is purchased on behalf of, and used by, the Government of Canada, the purchaser must provide certification that the Government of Canada is the purchaser. The Government of Canada includes all federal departments, certain agencies and crown corporations.
    
    
15. An operator should obtain from the purchaser an exemption certificate in the following form:

“This is to certify that the accommodation ordered/purchased is being purchased by (name of department, agency or crown corporation) which is part of the Government of Canada or a tax-free Government of Canada agency, and is therefore not subject to the Alberta tourism levy.”

16. The exemption certificate must specifically refer to the purchase order, contract, or invoice relating to the accommodation obtained and must be kept by the operator for possible later audit. Any accommodation sold to a Government of Canada entity without an exemption certificate being obtained is subject to the tourism levy.

Lodging Provided on an Indian Reserve

17. An Indian or Indian band is exempt from paying the tourism levy if:
    
    
    1. the accommodation is provided on an Indian reserve,
    2. the Indian or Indian band presents a valid identification card at the time of purchase, and
    3. the accommodation is for the use of the Indian or Indian band.
       
       
18. An identification card can be either a ministerial identification card issued for the purposes of Alberta's Fuel or Tobacco Tax Act or Regulations or a card issued under the Indian Act (Canada) showing the cardholder is an Indian. Any accommodation purchased by an Indian or Indian band without an identification card is subject to the tourism levy.
    
    
19. Information about the name of the Indian or Indian band purchasing the accommodation, the type of identification card used, and the card number must be kept by the operator for possible later audit.

Work Camps

20. Lodging provided to an employee by an employer, or to an independent contractor by a person who is engaging the contractor’s services, in work camps is exempt from the levy if the following criteria are met:  
    
    
    • the employer or the person who is engaging the services of the independent contractor is not in the business of selling lodging,
    • the establishment is owned by, or managed on behalf of, the employer or the person who is engaging the services of the independent contractor, and
    • the establishment is a work camp.
      
      
21. To be exempt from the levy, the facility must provide lodging to employees or independent contractors all, or substantially all, of the time.  Generally, this means that, at any time, lodging is provided to employees or independent contractors at least 90 per cent of the time, or in at least 90 per cent of the rooms.
    
    
22. From time to time, a work camp might sell lodging to hikers, backpackers, or other travellers in the area.  The tourism levy applies to the lodging provided to individuals other than the employees or independent contractors.
    
    
23. A work camp qualifies for exemption from the levy even if managed on behalf of multiple employers or persons engaging the services of independent contractors, providing that the camp meets all the above requirements.

Levy Collected, Exemption Later Established

24. The operator can omit the levy only if the operator knows of an exemption condition at the time the lodging is paid for and the exemption is recorded on the invoice, for example, when the lodging is occupied by the same individual continuously for 28 days or more. Operators are required to retain relevant documents to support all levy-exempt revenue recorded.
    
    
25. If at first the levy is charged and the qualification for an exemption is later established, the operator may refund the levy to the purchaser and deduct the amount on the next return. The operator should retain the documentation to support the deduction.

Calculation of the Tourism Levy

26. The tourism levy is calculated on the purchase price paid for accommodation in Alberta, before application of the Goods and Services Tax (GST).
    
    
27. If the price charged for lodging includes meals or other services, the purchase price is that price reasonably attributable to the lodging alone.
    
    
28. Where the consideration received for the accommodation is other than monetary consideration, is made in kind, or the accommodation is occupied by a contractor performing services for the operator (e.g., trades people or entertainers) the tourism levy is to be collected on the purchase price deemed to be:
    
    
    • that of similar accommodation made available to another person by the operator on the day(s) the person occupies the accommodation, or
    • the amount, in the opinion of the Minister of Finance, reasonably attributable to the accommodation.
      
      
29. For prepaid vacation packages, the levy is payable on the purchase price attributable to the accommodation only at the time the payment is made for the right to use the accommodation. The purchase price for a prepaid vacation package includes the consideration given for any initial or ongoing maintenance fees for the accommodation. In the case of ongoing maintenance fees, the levy is payable when the fees are paid.