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New York Adopts a VAT

10 Pages Posted: 21 Jun 2011 Last revised: 5 Oct 2011

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Date Written: June 21, 2011


On August 13, 2010 the New York State Department of Taxation and Finance, Office of Tax Policy Analysis, Taxpayer Guidance Division released Amendments Affecting the Application of Sales Tax to Rent Received for Hotel Occupancy by Room Remarketers. The legislative revision it considers (Chapter 57 of the Laws of 2010) was effective September 1, 2010. The changes brought in by this Chapter effectively converted New York’s Hotel Room Occupancy Tax from a single-stage retail sales tax to multi-stage European-style VAT.

This paper considers the New York VAT in hotel accommodations in three sections. The first defines a European-style credit-invoice VAT and applies it to the New York Hotel Room Occupancy Tax, the second considers the critical term – the operator – and examines how this term in the context of a hotel tax modeled on the retail sales tax creates problems when virtual intermediaries get involved facilitating accommodation rentals, and the third considers the new term room remarketer as it is used in the New York Hotel Room Occupancy Tax.

A short concluding section discusses why in re-designing this tax as a VAT New York has made an insightful tax policy decision. New York will most likely increase revenue without increasing rates or expanding the tax base with this decision. Gains will come from increased efficiency, more stable revenue deposits from fractionated payments, and lower enforcement costs from the self-enforcing nature of the VAT.

In these difficult economic times when the call for “no new taxes” is heard in tandem with a demand for more revenue to pay for necessary programs, New York seems to have accomplished the impossible. By adopting a limited purpose, European-style, credit-invoice VAT in the hotel tax it has increased revenue and decreased enforcement costs without raising rates or expanding the tax base. Other jurisdictions should take notice.

Keywords: Value Added Tax, VAT, Virtual intermediaries, Room remarketers, New York Hotel Room Occupancy Tax, HROT, No new taxes, No tax increases, No tax base expansion, Increase tax revenue, Fractioned payments, Self-enforcing

JEL Classification: K00, K34, K42

Suggested Citation

Ainsworth, Richard Thompson, New York Adopts a VAT (June 21, 2011). Boston University School of Law, Law and Economics Research Paper No. 11-29. Available at SSRN: or

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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