1. a) Nature and Rate of Tax

   1. 1) The Hotel Operators' Occupation Tax Act (the Act) imposes a tax upon hotel operators at the rate of 5% of 94% of the gross rental receipts from engaging in business as a hotel operator, excluding, however, from the gross rental receipts, the proceeds of renting, leasing or letting hotel rooms to permanent residents of a hotel (i.e., from persons who occupy or have the right to occupy such rooms for at least 30 consecutive days) and proceeds from the tax imposed under subsection (c) of Section 13 of the Metropolitan Pier and Exposition Act.
   2. 2) There is also imposed an additional tax upon hotel operators at the rate of 1% of 94% of the gross rental receipts received by the hotel operator from engaging in business as a hotel operator, excluding, however, from gross rental receipts, the proceeds of the renting, leasing or letting to permanent residents of that hotel and proceeds from the tax imposed under subsection (c) of Section 13 of the Metropolitan Pier and Exposition Act.
   3. 3) A hotel is any kind of building in which the public may, for a consideration, obtain living quarters or sleeping or housekeeping accommodations (e.g., hunting lodges, camps, cabins, apartments, houses and rooms). (For a more complete definition of "hotel", see Section 480.105.)
   4. 4) The exclusion for permanent residents means that the tax is imposed on hotel operators engaging in the business as a hotel operator renting rooms for use as living quarters, or for sleeping or housekeeping accommodations, when renting is done on a transient basis.
   5. 5) The tax is an occupation tax whose legal incidence is on the lessor of the rooms. Nevertheless, persons subject to the tax imposed by the Hotel Operators' Occupation Tax Act may reimburse themselves for their tax liability under the Act by separately stating the tax as an additional charge that may be stated in combination, in a single amount, with any locally imposed hotel operators' occupation tax. If any hotel operator collects an amount (however designated) which purports to reimburse such operator for hotel operators' occupation tax liability measured by receipts which are not subject to hotel operators' occupation tax, or if any hotel operator, in collecting an amount (however designated) which purports to reimburse such operator for hotel operators' occupation tax liability measured by receipts which are subject to tax under the Act, collects more from the guest or re-renter than the operator's hotel operators' occupation tax liability in the transaction is, the guest or re-renter, as applicable, shall have a legal right to claim a refund of such amount from such operator. However, if such amount is not refunded to the guest or re-renter, as applicable, for any reason, the hotel operator is liable to pay such amount to the Department. [35 ILCS 145/3(f)]
   6. 6) Any amount added to a taxable rental charge and collected because of the tax also represents a portion of the gross rental receipts that are subject to the tax. However, the tax rate, instead of being a flat 6% of total receipts, has been adjusted by the General Assembly to be 5% of 94% plus 1% of 94% of total receipts, in order to avoid the payment of tax on amounts added to rental charges because of the tax.
   7. 7) Persons who engage in the business of renting, leasing or letting of rooms that are not subject to tax under the Hotel Operators' Occupation Tax Act (e.g., the rentals are only to permanent residents or the rentals are exempt as provided in subsection (c)(2)) are not required to register and remit the tax imposed by the Hotel Operators' Occupation Tax Act.

   8. 8) Re-renters

      1. A) Beginning on July 1, 2024, if the renting, leasing, or letting of a hotel room is done through a re-renter of hotel rooms, then, subject to the provisions of subsections (a)(8)(D) and (a)(8)(E), the re-renter is the hotel operator for the purposes of the taxes under subsections (a)(1) and (a)(2).

         EXAMPLE 1: Company contracts with Hotel Operator for 10 rooms in Hotel Operator's hotel for specific dates and pays Hotel Operator for the rooms. Guests can book hotel rooms through the Company's website, including 1 of the 10 rooms in the Hotel Operator's hotel. Company collects and retains the rent from the guest renting the room. The Company is a re-renter of the hotel rooms rented from Hotel Operator, is the hotel operator for purposes of the tax, and is liable for taxes on the rent collected from the person.

         EXAMPLE 2: Company operates a website that lists hotel rooms that guests may rent through the Company's website. A guest selects a hotel and the type of room the guest wishes to rent. The Company's system verifies the availability of the room with the Hotel Operator, rents and pays for the room, and confirms the booking with the guest. The Company collects and retains the rent it quoted the guest. The Company is a re-renter of the hotel room rented from Hotel Operator, is the hotel operator for purposes of the tax, and is liable for taxes on the rent collected from the person.

         EXAMPLE 3: Company operates a website that lists hotel rooms that guests may rent through the Company's website. A guest selects a hotel and the type of room the guest wishes to rent. The Company's system verifies with the availability of the room with the Hotel Operator and facilitates the rental of the room to the guest. The Company collects the rent it quoted the guest. The Company subsequently sends the rent to the Hotel Operator less its fee. The Company is a re-renter of the hotel room rented from Hotel Operator, is the hotel operator for purposes of the tax, and is liable for taxes on the rent collected from the person.

         EXAMPLE 4: VAC enters into agreements with owners or tenants of owner-occupied, tenant-occupied, or non-owner-occupied dwellings (including apartments, houses, cottages, or condominiums) located in this State to list the dwellings on VAC's platform for short-term rental. All dwellings are rented for less than 30 consecutive days and are reserved in advance. OWNER lists a condominium on VAC's platform for $500 per day. OWNER also charges an $80 fee for cleaning the condominium. A person rents the condominium for 7 days. VAC charges and collects from the person $3,500 for the condominium rental, $80 for the cleaning services, and a $700 VAC service fee. It forwards $3580 to OWNER ($3500 rent + $80 cleaning fee) and retains the $700 service fee. VAC does not have any Hotel Operator Occupation Tax liability. OWNER is the operator for purposes of the tax and has a Hotel Operator Occupation Tax liability on the $3580 received from VAC.

      2. B) If the re-renter is headquartered outside of this State and has no presence in this State other than its business as a re-renter, conducted remotely, then, subject to the provisions of subsections (a)(8)(D) and (a)(8)(E), such re-renter is the hotel operator for the purposes of the taxes under subsections (a)(1) and (a)(2) if it meets one of the following thresholds:

         1. i) the cumulative gross receipts from rentals in Illinois by the re-renter of hotel rooms are $100,000 or more; or
         2. ii) the re-renter of hotel rooms cumulatively enters into 200 or more separate transactions for rentals in Illinois.
      3. C) A re-renter of hotel rooms who is headquartered outside of this State and has no presence in this State other than its business as a re-renter, conducted remotely, shall determine on a quarterly basis, ending on the last day of March, June, September, and December, whether the re-renter meets the threshold of either paragraph (i) or (ii) of subsection (a)(8)(B) for the preceding 12-month period. If such re-renter of hotel rooms meets the threshold of either paragraph (i) or (ii) of subsection (a)(8)(B) for a 12-month period, the re-renter is subject to tax under the Act and is required to remit the tax imposed under the Act and file returns for the 12-month period beginning on the first day of the next month after the re-renter determines that the re-renter meets the threshold of paragraph (i) or (ii) of subsection (a)(8)(B). At the end of that 12-month period, such re-renter of hotel rooms shall determine whether the re-renter continued to meet the threshold of either paragraph (i) or (ii) of subsection (a)(8)(B) during the preceding 12-month period. If the re-renter met the threshold in either paragraph (i) or (ii) of subsection (a)(8)(B) for the preceding 12-month period, the re-renter is a hotel operator in this State and is required to remit the tax imposed under the Act and file returns for the subsequent 12-month period. If, at the end of a 12-month period during which such re-renter is required to remit the tax imposed under the Act, the re-renter determines that the re-renter did not meet the threshold in either paragraph (i) or (ii) of subsection (a)(8)(B) during the preceding 12-month period, the re-renter shall subsequently determine on a quarterly basis, ending on the last day of March, June, September, and December, whether the re-renter meets the threshold of either paragraph (i) or (ii) of subsection (a)(8)(B) for the preceding 12-month period. [35 ILCS 145/3(b-5)]
      4. D) A hotel operator who rents, leases, or lets rooms subject to tax under the Act to a re-renter of hotel rooms incurs the tax under the Act on the gross rental receipts it receives from that re-renter of hotel rooms and cannot claim any resale exemption. In such situations, the re-renter of hotel rooms incurs tax under the Act on its gross rental receipts as provided in subsections (a)(1) and (a)(2). [35 ILCS 145/3-2]

      5. E) A re-renter of hotel rooms may take a credit against the tax it incurs on the rental of a hotel room under the Act for the amount it paid under subsection (a)(5) to a hotel operator as reimbursement for the tax incurred under the Act for the rental of that room for the purposes of re-rental. [35 ILCS 145/3-3]

         EXAMPLE 1: Company rents a downstate hotel room from Hotel Operator for $100. Hotel Operator charges the Company $100 plus $5.98 to reimburse the Hotel Operator for its tax liability under the Act. Company rents the hotel room to a guest and charges the guest $150 plus $8.97 to reimburse the Company for its tax liability under the Act. Hotel Operator must file a return and remit $5.98 in tax. The Company must file a return and pay tax. The Company may take a credit for the $5.98 it paid Hotel Operator. The Company must file a return and pay $2.99 in tax.

         EXAMPLE 2: Company facilitates the rental of Hotel Operator's downstate hotel room. Company rents the hotel room to a guest and charges the guest $200 plus $11.96 to reimburse the Company for its tax liability under the Act. Of the $211.96 collected from the guest, Company passes on $100 to the Hotel Operator for the rental of the room. The Company advises the Hotel Operator it will pay the tax on the entire amount it receives from its customer and does not pass on $5.98 to reimburse the Hotel Operator for its tax liability under the Act. Hotel Operator must file a return and remit $5.98 in tax. Because the Company did not reimburse Hotel Operator for its tax liability, it cannot take a credit for the $5.98 tax paid by Hotel Operator. The Company must file a return and pay $11.96 in tax.

2. b) Scope of the Tax − Examples of Taxability and Exemption

   1. 1) Since the hotel operators' occupation tax is imposed on receipts from renting rooms for living quarters, or for sleeping or housekeeping accommodations, the tax does not apply to the receipts from the renting of rooms for other purposes, such as for use as display rooms or sample rooms, as meeting rooms, as offices or as private dining rooms.
   2. 2) Since the tax is limited to the renting of rooms to the "public", a private club that restricts its renting of rooms to its members and their guests would not be liable for the tax on its rental receipts from those rooms.
   3. 3) Hotel operators engaging in the business as a hotel operator renting rooms to the public for use as living quarters, or for sleeping or housekeeping accommodations, is subject to the tax even if the person paying for the room may be a church (except as provided in subsection (c)(2)), charity (except as provided in subsection (c)(3)) or school or some other kind of nonprofit organization, and even if the person paying for the room may be a governmental agency or instrumentality (federal, State or local, or even a foreign government).
   4. 4) There is no exemption simply because the lessor of the rooms is a nonprofit organization, such as a church (except as provided in subsection (c)(2)), charity (except as provided in subsection (c)(3)) or school. However, a college or other school is not subject to the tax on its receipts from renting rooms to its students for use as living quarters or for sleeping or housekeeping accommodations because this is not the renting of the rooms to the "public". Nevertheless, if the school rents rooms for these purposes to persons who are not enrolled with the school in courses of study for credit, that renting is not being done to students, but is being done to the "public", and the school incurs hotel operators' occupation tax liability on its rental receipts from this activity, if the lessees do not qualify as permanent residents.
   5. 5) Likewise, the renting of rooms on a transient basis to the public for use as living quarters or sleeping or housekeeping accommodations when the lessor is a charitable organization, such as the Y.M.C.A. or the Y.W.C.A., is subject to the hotel operators' occupation tax.
   6. 6) If an operator should make a separate and specific charge for the use of bedding or other facilities furnished in connection with the use of a room as living quarters or for sleeping or housekeeping accommodations, the operator's additional receipts from this source are subject to the hotel operators' occupation tax. However, that tax does not apply to the operator's receipts from selling food, beverages or other tangible personal property, nor to receipts from the selling of tickets to theatre performances or other similar activities, nor to other receipts that are not in any way reasonably connected with or attributable to the renting, leasing or letting of rooms for use as living quarters or for sleeping or housekeeping accommodations; provided that exemption for nontaxable receipts cannot be claimed unless supported by proper books and records as provided for in Section 4 of the Hotel Operators' Occupation Tax Act and in Section 480.115.

   7. c) Exemption from Hotel Operators' Occupation Tax

      1. 1) The hotel operators' occupation tax is not imposed upon gross rental receipts for which the hotel operator is prohibited from obtaining reimbursement for the tax from the customer by reason of a federal treaty (Section 3 of the Act). Under the Vienna Convention, some foreign diplomats are not required to pay reimbursement charges that are similar in nature to taxes.

         1. A) The exemption for rentals to certain diplomatic personnel applies only to diplomatic personnel possessing certain types of diplomatic tax exemption cards issued by the U.S. Department of State, Office of Foreign Missions. There are 2 types of diplomatic tax exemption cards: personal tax exemption cards and mission tax exemption cards. Mission tax exemption cards are used by foreign missions to obtain exemption from certain taxes, including taxes on hotel stays and lodging, on purchases in the United States that are necessary for the mission's operations and functions. The Office of Foreign Missions is the only entity in the United States with legal authority to authorize diplomatic and consular tax exemption privileges. Foreign missions may not independently purport to authorize or otherwise certify to a vendor or governing tax authority the availability of tax exemption privileges for the embassy, its consular posts or members. A mission tax card may not be used to exempt taxes on hotel or lodging expenses unrelated to a mission's diplomatic or consular functions, such as those related to tourism, medical treatment, or leisure travel. The exemption only applies if:

            1. i) the foreign mission holds a valid Mission Tax Exemption Card that allows for the relief of such taxes;
            2. ii) the travel of the individuals described above is conducted in support of the missions' diplomatic or consular functions; and

            3. iii) the lodging costs are paid for with a check, credit card, or wire transfer transaction in the name of the foreign mission. Cash is not an acceptable form of payment.

               In addition, the American Institute in Taiwan/Washington issues Mission Tax Exemption Cards and Personal Tax Exemption Cards to officials of the Taipei Economic and Cultural Representative Office. For examples of these cards, see 86 Ill. Adm. Code 130.Illustration A.

         2. B) In documenting this exemption, a hotel operator must obtain the mission's name, the card holder's name, the exemption number, the expiration date, and a photocopy of the diplomatic card.

      2. 2) Effective July 1, 2017, the Hotel Operators' Occupation Tax is not imposed upon gross rental receipts received by an entity that is organized and operated exclusively for religious purposes and possesses an active Exemption Identification Number (ExIN) issued by the Department pursuant to the Retailers' Occupation Tax Act when acting as a hotel operator renting, leasing, or letting rooms:

         1. A) in furtherance of the purposes for which it is organized; or

         2. B) to entities that:

            1. i) are organized and operated exclusively for religious purposes;
            2. ii) possess an active ExIN issued by the Department pursuant to the Retailers' Occupation Tax Act; and
            3. iii) rent the rooms in furtherance of the purposes for which they are organized.
         3. C) No gross rental receipts are exempt under subsection(c)(2) unless the hotel operator obtains the active ExIN from the exclusively religious entity to whom it is renting and maintains that number in its books and records.

         4. D) Gross rental receipts from all rentals other than those described in subsection (c)(2) are subject to the tax imposed by the Hotel Operators' Occupation Tax Act, unless otherwise exempt under that Act. [35 ILCS 145/3(d-5)]

            EXAMPLE 1: A religious organization is organized and operated exclusively for religious purposes and has an active ExIN. It operates a retreat center and organizes and conducts a 3-day marriage counseling seminar and rents rooms to the participants of the seminar. The seminar is in furtherance of its organizational purposes. The receipts from these rentals are not subject to the hotel operators' occupation tax under subsection (c)(2).

            EXAMPLE 2: Religious Organization A is organized and operated exclusively for religious purposes and has an active ExIN. It operates a retreat center and rents a block of rooms to Religious Organization B. Religious Organization B is organized and operated exclusively for religious purposes, possesses an active ExIN, and provides rooms to the participants of a spiritual seminar it has organized and will conduct. The seminar furthers the organizational purposes of Organization B. Organization A's receipts from these rentals are not subject to the hotel operators' occupation tax under subsection (c)(2). In this Example, if the rooms are paid for by the individual participants and not by Organization B, Organization A must keep records demonstrating that the individual to whom the room was rented was a participant in the seminar conducted by Organization B. If Organization A does not keep these records, the receipts from those rentals are taxable.

            EXAMPLE 3: Religious Organization A is organized and operated exclusively for religious purposes and has an active ExIN. It operates a retreat center. Religious Organization A's organizational documents demonstrate it is organized, in part, to partner with school districts to provide one-on-one support to students to help them overcome the educational and societal challenges they face both in and out of school. Organization B is a not-for-profit organization that provides funds and support to school districts that serve at-risk students. Religious Organization A rents a block of rooms to Organization B for participants attending a seminar conducted by Organization B for educators of at-risk youth. Because the seminar conducted by Organization B is in furtherance of Organization A's organizational purposes, the receipts from the rental to Organization B are not subject to the hotel operators' occupation tax under subsection (c)(2). In this Example, Religious Organization A must keep records demonstrating that the seminar was in furtherance of its organizational purposes (e.g., a copy of its charter, mission statement, and by laws, as well as any brochures or agendas pertaining to the seminar). In addition, if the rooms are paid for by the individual participants and not by Organization B, Religious Organization A must keep records demonstrating that the individual was a participant in the seminar conducted by Organization B (e.g., a copy of the seminar's sign-in sheet).

            EXAMPLE 4: A religious organization operates a retreat center, is organized and operated exclusively for religious purposes, and has an active ExIN. It rents a block of rooms to persons attending a wedding reception at the center or rents a block of rooms to a not-for-profit organization that conducts a sports-medicine seminar. The receipts from either of these rentals do not qualify for the exemption in subsection (c)(2) because the rentals are neither made in furtherance of the organizational purposes of the religious organization operating the retreat center, nor made to a religious organization organized and operated exclusively for religious purposes that has an active ExIN.

   8. E) Records

      1. i) When a religious organization that has an active ExIN operates a retreat center, conducts an event in furtherance of its organizational purposes, and rents rooms to persons attending that event, the religious organization must obtain and maintain the following: documents demonstrating the nature of the event (e.g., brochures, pamphlets, or agendas of the event); documents demonstrating how the rental of the rooms was in furtherance of its organizational purposes (e.g., a copy of the religious organization's mission statement or charter); and the dates of the room rentals.
      2. ii) When a religious organization that has an active ExIN operates a retreat center and rents rooms to an entity organized and operated exclusively for religious purposes with an active ExIN that conducts an event in furtherance of its organizational purposes, the religious organization operating the retreat center must obtain and maintain the following: the name, address, and phone number or email of the renting religious organization conducting the event; the renting religious organization's active ExIN; documents demonstrating the nature of the event (e.g., brochures, pamphlets, or agendas of the event); a certification that the room rentals were in furtherance of the organizational purposes of the renting religious organization; the dates of the room rentals; and any contracts between the retreat center and the religious organization that rented the rooms.
      3. iii) When a religious organization that has an active ExIN operates a retreat center and is not conducting an event at the center but rents to another organization that conducts an event that furthers the organizational purposes of the retreat center's religious organization, the religious organization operating the retreat center must obtain and maintain the following: the name, address, and phone number or email of the renting organization conducting the event; documents demonstrating the nature of the event (e.g., brochures, pamphlets, or agendas); a certification by the religious organization operating the retreat center that the room rentals by the renting organization were in furtherance of the retreat center's organizational purposes, and documents demonstrating how the rental of the rooms was in furtherance of the retreat center's organizational purposes (e.g., the retreat center's mission statement or charter); the dates of the room rentals; and any contracts between the religious organization operating the retreat center and the renting organization conducting the event.

      4. 3) Effective July 1, 2023, the Hotel Operators' Occupation Tax shall not apply to gross rental receipts received from the renting, leasing, or letting of rooms to an entity that is organized and operated exclusively by an organization chartered by the United States Congress for the purpose of providing disaster relief and that possesses an active Exemption Identification Number (ExIN) issued by the Department pursuant to the Retailers' Occupation Tax Act if the renting, leasing, or letting of the rooms is in furtherance of the purposes for which the exempt organization is organized. The American National Red Cross is an example of an organization chartered by the United States Congress for the purpose of providing disaster relief pursuant to 36 U.S.C. Ch. 3001. [35 ILCS 145/3(d-10)]

         1. A) The exempt chartered organization must make the payment itself for the renting of the rooms. Cash payments are not allowed with the exemption. Acceptable payment methods include:

            1. i) use of a credit card that is directly billed to the organization and is either in its name only or in the organization's name and the name of a person authorized to use it; or
            2. ii) a check drawn on an account belonging only to the organization; or
            3. iii) use of a purchase order from the organization that is billed to the organization.

         2. B) To qualify, the hotel operator must obtain and maintain from the organization:

            1. i) documentation that the renting, leasing, or letting of the room is associated with the organization. Acceptable documentation includes a copy of an employee identification badge; and
            2. ii) a copy of the active Illinois Exemption Number Certificate issued by the Department. (Note: It is the operator's responsibility to verify that the organization's ExIN is valid and active).
      5. 4) Such tax is not imposed upon the privilege of engaging in any business in Interstate Commerce or otherwise, which business may not, under the Constitution and Statutes of the United States, be made the subject of taxation by this State. [35 ILCS 145/3(d)]

3. d) How to Compute Applicable Tax Rate or Effective Date of New Tax

   1. 1) For the purposes of the Hotel Operators' Occupation Tax Act, any tax liability incurred in respect to the renting, leasing or letting of rooms in a hotel shall be computed by applying, to the gross receipts from the renting, leasing or letting, the tax rate in effect as of the date the lessee occupies a specific room or rooms or becomes irrevocably liable to pay rent for the right to occupy a specific room or rooms. Deposits paid in advance shall be deemed to be received as rental receipts when the specific room or rooms to which the deposit is applied as rent shall be deemed to be rented, leased or let within the meaning of the preceding sentence.
   2. 2) Likewise, when something that has been exempted becomes taxable as to room renting, leasing or letting that occurs on or after some particular date, the date of renting, leasing or letting for this purpose shall be deemed to be the date when the lessee occupies a specific room or rooms or becomes irrevocably liable to pay rent for the right to occupy a specific room or rooms.

(Source: Amended at 49 Ill. Reg. 11548, effective August 27, 2025)