Buying or selling a hotel or motel: room taxes, liquor licences, assessment and handover

Why a real estate licence applies

A hotel or motel sale that includes land or a lease is a trade in real estate, so whoever facilitates it must be a licensee acting through a brokerage. An asset sale with no real estate component needs no licence; neither does a sale of 100% of a company's shares when the company owns and leases no real property; and a sale of less than 100% of the shares is not a real estate transaction.

Assets versus shares, and what happens to employees, are covered on my buying or selling a business page.

Room taxes: 8% PST plus the municipal and regional district tax

Short-term accommodation in BC carries 8% PST, plus up to 3% MRDT in participating areas. The City of Vancouver charges 3%, plus a temporary 2.5% Major Events MRDT until January 31, 2030. Neither applies to a continuous stay of 27 days or more. Your PST number is also your MRDT number.

The registration does not transfer: the new owner must register before its first taxable sale. Before the handover, get a clearance certificate from the province (FIN 447); without one, the buyer becomes liable for PST the seller still owes.

PST on furniture and equipment, GST on the real estate

In an asset purchase, PST applies to the fair market value of taxable goods such as furniture and equipment, but not to the real property or to inventory bought for resale.

A sale of commercial real property is generally subject to GST; a GST-registered buyer self-assesses instead of paying it to the seller. When a buyer acquires at least 90% of a business's property, buyer and seller can jointly elect (section 167, Form GST44) to have no GST payable, but GST still applies to taxable real property sold to a buyer who is not registered. Talk to your accountant before you sign.

Transferring the liquor licence

If there is a bar or restaurant, the buyer applies to the Liquor and Cannabis Regulation Branch (LCRB) to transfer the liquor licence, for a $330 fee. The establishment can stay open: the seller maintains the licence until the LCRB tells both parties the application is administratively complete, and then the buyer becomes the deemed licensee and can operate.

Assessment and value: BC Assessment Class 6

BC Assessment places hotels and motels in Class 6 (business and other); owner or manager suites and rooms declared for long-term stays go in Class 1. Hotels are valued using a capitalized net operating income (NOI) approach.

Strata hotel units are split between Class 1 and Class 6 by use, which must be reported by August 31 each year.

Short-term rental rules, brands, employees and licences

BC's Short-Term Rental Accommodations Act does not apply to hotels and motels. Strata hotels are different: their platforms must register with the province, and certain strata hotels are exempt from the principal residence requirement.

For a branded hotel, talk to the brand before you commit: whether you can take over the franchise agreement, whether a property improvement plan (PIP) will be required, and what it will cost. How PIP costs fit into the financing is in my PIP renovation guide.

Employees: under section 97 of BC's Employment Standards Act, employment is deemed continuous and uninterrupted when a business is sold.

Vancouver: a new owner needs a licence transfer or a new business licence before operating; Vancouver Coastal Health inspects food service; commercial pools and hot tubs need a VCH operating permit; and every building with a fire alarm system needs a fire safety plan.

How I work on a hotel or motel

Buying: recent years of operating figures — room revenue, occupancy and expenses — and the BC Assessment valuation first, to work out how much of the price is real estate and how much is business; then the liquor licence, the brand agreement, the employees and the licences. The financing side — how much down payment, and which lenders are doing hotels now — is on my hotel and motel financing page.

Selling: have those documents ready before listing, so the buyer's condition period is spent on the hotel, not on waiting for paperwork.

If I act on both the property and the financing, I tell you in writing, before you sign anything, which role I am in and how I am paid in each.

Common questions

What taxes apply to hotel and motel room sales in BC?

8% PST, plus up to 3% MRDT in participating areas; the City of Vancouver charges 3%, plus a 2.5% Major Events MRDT until January 31, 2030. Neither applies to a continuous stay of 27 days or more.

Can I keep using the seller's PST number when I buy a hotel?

No. The number does not transfer; the new owner registers before its first taxable sale (the PST number is also the MRDT number). Get a clearance certificate before the handover, or you can be liable for PST the seller owes.

Does the liquor licence transfer when I buy a hotel, and does the bar have to close?

You apply to transfer it, for $330, and the establishment can stay open. Once the LCRB confirms the application is administratively complete, the buyer becomes the deemed licensee and can operate.

How does BC Assessment value a hotel or motel?

In Class 6 (business and other), using a capitalized net operating income approach; owner or manager suites and declared long-term-stay rooms go in Class 1.

Do BC's short-term rental rules apply to hotels and motels?

No. The Short-Term Rental Accommodations Act does not apply to hotels and motels; strata hotel platforms must register, and certain strata hotels are exempt from the principal residence requirement.

Is PST charged on the furniture and equipment when I buy a hotel?

Yes, on their fair market value; the real property and resale inventory are not subject to PST. The real estate is generally subject to GST, which a registered buyer self-assesses.