Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGO 1960 No. 94 -
Attorney General John J. O'Connell


Sales of tangible personal property made to one engaged in the operation of a motel for use in furnishing and servicing the motel are subject to the retail sales or use tax under § 1, chapter 5, Laws of 1959, Ex. Sess.

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                                                                  January 7, 1960

Honorable Lincoln E. Shropshire
State Representative, Fourteenth District
606 Miller Building
Yakima, Washington                                                                                             Cite as:  AGO 59-60 No. 94

Dear Sir:

            By letter previously acknowledged you requested the opinion of this office on a question which we paraphrase as follows:

            Are sales of tangible personal property made to one engaged in the operation of a motel for use in furnishing and servicing said motel subject to the Retail Sales or Use Tax, in view of section 1, chapter 5, Laws of 1959, Extraordinary Session?

            We answer your question in the affirmative.


            RCW 82.02.040, as amended by § 1, chapter 5, Laws of 1959, Ex. Sess., provides:

            "'Sale' means any transfer of the ownership of, title to, or possession of property for a valuable consideration and includes any activity classified as a 'sale at retail' or 'retail sale' under RCW 82.04.050.  It includes renting or leasing, conditional sales contracts, leases with option to purchase, and any contract under which possession of the property is given to the purchaser but title is retained by the vendor as security for the  [[Orig. Op. Page 2]] payment of the purchase price.  It also includes the furnishing of food, drink, or meals for compensation whether consumed upon the premises or not."  (Emphasis supplied)

            RCW 82.04.050, as amended by § 2, chapter 5, Laws of 1959, Ex. Sess., provides in part:

            "'Sale at retail' or 'retail sale' means every sale of tangible personal property (including articles produced, fabricated, or imprinted) other than a sale to one who (a) purchases for the purpose ofresale as tangible personal property in the regular course of business, . . .

            "The term 'sale at retail' or 'retail sale' shall include thesale of or charge made for tangible personal property consumed and/or for labor andservices rendered in respect to the following: . . . (e) thesale of and charge made for the furnishing of lodging and all other services by a hotel, rooming house, tourist court,motel, trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, and it shall be presumed that the occupancy of real property for a continuous period of one month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same."  (Emphasis supplied)

            Pursuant to RCW 82.04.050 the sale of tangible personal properties of the kinds described in your letter to operators of hotels and motels are subject to the retail sales tax (RCW 82.08.020) unless exempt under the "resale" exemption (RCW 82.04.050 (a)) or some other exemption.

            It can be seen that if tangible personal property such as furnishings, linen, and soap wereactually "rented or leased" by a motel operator, the original purchase of these articles might be considered to be for the purpose of resale within the meaning of § 1, chapter 5, Laws of 1959, Ex. Sess., and § 2, chapter 5, Laws of 1959, Ex. Sess., (RCW 82.04.050).

            However, the fact that the 1959 session of the legislature extended the applicability of the retail sales tax to include transactions of renting and leasing personal property (§ 1, chapter 5, Laws of 1959, Ex. Sess.) is of little moment unless under the language of the statute the taxable  [[Orig. Op. Page 3]] incident here involved is the "renting or leasing" of such personalty as you have described in your letter.  But such is not the case.  From an examination of the statutory language it is clear that the term "retail sale" or "sale at retail" can include not only the category of "sale of tangible personal property," and therefore the renting or leasing of such property, but also a wider and distinct category, that of "charge . . . made for . . . services rendered."  It is also clear that the taxable incident in the case of motels is not in the former category, sale of tangible personal property, but in the latter category, charge made for rendering of services.  Yet the resale exemption applies only when there is a retail sale involving the former category, for there must be a "resale as tangible personal property."  Accordingly, the resale exemption does not apply when the taxable incident is the rendering of services, and the fact that the term "sale of tangible personal property" can now include the renting or leasing of such property and the fact that the resale exemption is thereby somewhat extended, is irrelevant.

            This distinction between renting property and rendering services finds support in the case ofSupply Laundry Co. v. Jenner, 178 Wash. 72, 34 P. (2d) 363 (1934), in which the court, distinguishing between the renting of offices and the operating of hotels, stated at p. 78:

            "There is a clear distinction between the business of renting offices and operating hotels, warehouses and storage places.  The income of the former is connected directly with the lease or rental of real estate, which is not within the spirit of the act; the latter are purely commercial businesses apart from the real estate itself, and contemplate a variety of services other than those connected with the rental of office space."

            This distinction has been followed by the state tax commission and is the basis for its Rule 166 of the "Rules Relating to the Revenue Act" (1956) published by the tax commission, and this rule is not impaired by the 1959 addition of the "renting or leasing" category to RCW 82.04.040.  The rule follows the analysis of the statutory language dealing with motels given above, and provides in part:

            "All sales of tangible personal property to such persons [motel operators], except such property as is to be resold as tangible personal property, are subject to the Retail Sales Tax.  In this regard, all sales of tangible personal property to such persons [motel operators] for use in the furnishing of  [[Orig. Op. Page 4]] lodging and related services are subject to the Retail Sales Tax,the charge made for lodging being for services rendered and not for the sale of any tangible personal property, as such; included are items such as soap, towels, linens, laundry and furnishings."  (Emphasis supplied)

            The rules and interpretations of an administrative agency to which rule making authority has been delegated are entitled to considerable weight in determining legislative intent;Fisher Flouring Mills Co. v. State, 35 Wn. (2d) 482, 213 P. (2d) 938 (1950); Earley v. State, 48 Wn. (2d) 667, 296 P. (2d) 530 (1956).

            Furthermore, the tax commission has the statutory authority to promulgate administrative rules which, if not inconsistent with the provisions of Title 82 RCW, have the same force and effect as if specifically included in this title (RCW 82.32.300).

            Accordingly, we believe that the tax commission's Rule 166 is a reasonable and valid interpretation of the statutory provision applicable to the sales of items to motel operators as described in your letter, and is therefore controlling.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

Attorney General

Deputy Assistant Attorney General