For Texas sales and mixed beverage tax, are restaurant/bar gratuities taxable, and does it matter whether they're voluntary tips or a mandatory service charge?
Apply this to your situation
This page answers the general question as of 2003. Ezel answers yours, under current Texas tax law, with citations.
Plain-English summary
ALERT: this document has been PARTIALLY SUPERSEDED four separate times since it was issued in 2003 — read the specific notices below before relying on anything beyond the gratuities holding.
This STAR document is not a typical one-issue private letter ruling. It's a large 2003 line-item taxability questionnaire the Comptroller sent to a hotel-industry requester (also cross-indexed as a Hotel Occupancy Tax document and a Mixed Beverage Tax document), walking through roughly 125 different categories of hotel and restaurant revenue — room charges, no-show/cancellation fees, packages, banquet and meeting-room revenue, pet fees, food and beverage sales, gratuities, room service, employee meals, complimentary items, newspapers, internet access, and more — stating for each whether it's taxable, and if so, under which tax (sales tax, hotel occupancy tax, or mixed beverage gross receipts tax).
The named topic — gratuities — breaks down like this:
- Voluntary tips are never taxable, whether the server keeps 100% of it or the restaurant retains a portion.
- A mandatory gratuity (service charge) is exempt only if it's 20% or less of the underlying charge AND is fully distributed to qualifying tipped employees — wait staff, busboys, bartenders, and wine stewards. It does NOT include janitorial staff, chefs, cashiers, or dishwashers; distributing the gratuity pool to any of those non-qualifying roles taints that portion.
- Any mandatory gratuity the restaurant keeps (rather than distributing), or that exceeds 20% as to the alcohol-service portion, is taxable — as ordinary sales tax or mixed beverage gross receipts tax depending on whether the underlying charge was for food or alcoholic beverages, and what type of TABC permit the establishment holds.
Four documented partial supersessions since 2003 (all noted directly in the STAR record):
- 2011 — mandatory gratuities rule change. Mixed Beverage Rule 3.1001(c)(6) was amended effective 10/6/2008 and Sales Tax Rule 3.337 was amended effective 11/28/2007 — meaning the gratuities holding summarized above reflects rule text that has since been updated; verify the current rule language before relying on the specific mechanics (e.g., the 20% threshold and the qualifying-employee list).
- 2014 — mixed beverage tax RATE changed. HB 3572 (83rd Legislature, 2013) cut the mixed beverage gross receipts tax from 14% (the rate this 2003 document uses throughout) to 6.7%, and added a new, separate 8.25% mixed beverage SALES tax, effective January 1, 2014. Current guidance is at STAR Accession No. 201311851L.
- 2020 — internet access services tax REPEALED. This document's discussion of taxable internet access (line ~1800) no longer applies — Texas repealed state and local sales tax on internet access effective 7/1/2020 (Texas had a federal Internet Tax Freedom Act grandfather exception delaying this until then).
- 2022 — newspaper exemption threshold changed. HB 3169 (effective 9/1/2013) amended Tax Code § 151.319 to define an exempt newspaper as one with an average sales price of $3.00 or less over a 30-day period — this document's newspaper-taxability entries predate that definition.
What this means for you
Restaurants and bars setting gratuity/service-charge policy
The safest, cleanest position remains fully voluntary tips — never taxable regardless of how they're split. If you use a mandatory service charge instead, keep it at 20% or less and make sure it's genuinely, fully distributed to actual tipped-service employees (not folded into general payroll, kept by ownership, or shared with kitchen/back-of-house staff) to preserve the exemption — but confirm current Rule 3.337/3.1001(c) language, since both were amended after this document issued.
Hotels and restaurants using this document as a broader reference
Don't treat this as a reliable current-law source for internet access charges, the mixed beverage tax rate, or newspaper exemptions — all three are flagged superseded, with the mixed beverage rate change being especially significant (14% dropping to 6.7% plus a new 8.25% sales tax layer is a fundamentally different tax structure, not just a rate tweak).
Anyone relying on other line items in this matrix
This enrichment covers the document's namesake topic (gratuities) and the four flagged supersessions in detail; the roughly 120 other revenue categories in the original matrix (room packages, banquet revenue, pet fees, employee meals, complimentary rooms, etc.) are preserved verbatim in the full original text below but have not been independently re-verified against current law here — treat unflagged sections with the same caution the Comptroller's own supersession pattern suggests (a 20+-year-old document, revisited for correction at least four separate times).
Common questions
Q: Are voluntary tips at a Texas restaurant subject to sales tax?
A: No — per this document, voluntary gratuities are never taxable, regardless of whether the server keeps all of it or the restaurant retains a share.
Q: Is a mandatory 18% service charge automatically taxable?
A: Not automatically — per this document (subject to the 2011 rule-amendment caveat), a mandatory gratuity of 20% or less is exempt if fully distributed to qualifying tipped employees like wait staff and bartenders; only the portion the restaurant retains or gives to non-qualifying employees is taxable.
Q: Can this 2003 document be relied on for the current mixed beverage tax rate?
A: No — the Comptroller has expressly flagged this document as superseded on that point; the 14% rate it describes was replaced in 2014 by a 6.7% mixed beverage gross receipts tax plus a new 8.25% mixed beverage sales tax (see STAR Accession No. 201311851L for current guidance).
Citations and references
Rules (as they stood when this document issued in 2003 — since amended, see alerts above):
- 34 Tex. Admin. Code Rule 3.337(c) (Restaurants, Caterers, and Vending Machine Operators — gratuities)
- 34 Tex. Admin. Code Rule 3.1001(c) (Mixed Beverage Gross Receipts Tax — gratuities; subsection (c)(6) amended 2008, subsection (c)(7) governs the alcohol-service portion above 20%)
- 34 Tex. Admin. Code Rule 3.289(c) (Hotel Occupancy Tax)
Superseding authority (flagged directly in the STAR record):
- Mixed Beverage Rule 3.1001(c)(6) amendment, effective 10/6/2008, and Sales Tax Rule 3.337 amendment, effective 11/28/2007 — affects the mandatory-gratuities holding
- HB 3572, 83rd Legislature (2013) — cut the mixed beverage gross receipts tax from 14% to 6.7% and added an 8.25% mixed beverage sales tax, effective 1/1/2014; current guidance at STAR Accession No. 201311851L
- Repeal of state/local sales tax on internet access, effective 7/1/2020 (federal Internet Tax Freedom Act grandfather period)
- HB 3169, effective 9/1/2013, amending Tax Code § 151.319's newspaper exemption price threshold to $3.00 average over 30 days
Source
- STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
- Opinion: https://star.comptroller.texas.gov/view/200307997L
Original ruling text
Note: This document is also indexed as a Hotel Tax document (STAR 200307995L) and a Mixed Beverage Tax document (STAR 200307996L).
STAR SUPERSEDED INFORMATION
Supersede type - Partial
Document superseded on - 12/21/2011
Issue(s) that caused the document to be superseded - mandatory gratuities
Reason(s) - Rule change - Mixed Beverage Rule 3.1001(c)(6) was amended effective 10/6/08 and Sales Tax Rule 3.337 was amended effective 11/28/07.
STAR SUPERSEDED INFORMATION
Supersede type — partially
Document superseded on — 04/11/2014
Issue(s) that caused the document to be superseded — mixed beverage gross receipts tax rate of 14%
Reason(s): Statutory change - HB 3572, 83rd Regular Session (2013) lowered the mixed beverage gross receipts tax from 14% to 6.7% and additionally imposed a mixed beverage sales tax of 8.25% effective January 1, 2014. For current policy see STAR 201311851L.
STAR SUPERSEDED INFORMATION
Supersede type: PARTIAL
Document superseded on: 07/01/2020
Issue(s) that caused the document to be superseded: Internet access services
Reason(s): State and local sales tax on internet access is repealed effective 07/01/2020. Although the federal Internet Tax Freedom Act (ITFA) to prohibit taxing internet access was adopted in 2016, Texas was included in a grandfather provision to delay the prohibition through 06/30/2020.
STAR Superseded Information
Supersede type: partial
Document superseded on: 01/13/2022
Issue(s) that caused the document to be superseded: average price of newspaper
Reason(s): House Bill 3169, effective 09/01/2013 amended Tax Code 151.319 to define an exempt newspaper as one that has an average sales price over a 30-day period of $3.00 or less.
July 10, 2003
Dear **:
Please find enclosed the completed questionnaire you requested.
Copies of rules, STAR documents, as well as other tax information pertaining to
the different taxes that hotels in Texas deal with on a daily basis, may be
obtained from the "Texas Taxes" page on the Comptroller's Window on State
Government Web site. The Internet address is
http://window.state.tx.us/m23taxes.html.
Links to individual tax pages (e.g., "Sales and Use," "Hotel," and "Mixed
Beverage") are listed on the left side of the page.
We will be mailing hotels a legislative update explaining changes made by the
2003 Texas Legislature.
If you have further questions, please call me toll free at 1-800-531-5441,
extension 6-6171. You may also e-mail me at [email protected] or
write me at the Tax Policy Division, Post Office Box 13528, Austin, Texas
78711-3528. My FAX number is 512/475-0900.
Sincerely,
Donald S. Dillard
Tax Policy Division
c: Mr. Kevin Koller, Supervisor
Sales Tax Policy
HOTEL ROOM REVENUE
Jurisdiction: Texas
Revised Date: July 10, 2003
1.
Revenue Description: Transient Rooms Revenue
Taxable Yes or No: Yes
Tax Type: Hotel Occupancy
Additional Comments: State hotel occupancy tax is 6%. Cities and counties may
impose additional local hotel taxes that are administered by the local taxing
authorities.
2.
Revenue Description: Guaranteed No Show Revenue
Taxable Yes or No: Yes*
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is due when the full room rate is paid and
cancellation is within 30 days of the scheduled stay. *Fees paid that are less
than the room rate are not taxable, such as a percentage or sliding scale .
3.a.
Revenue Description: Complimentary Rooms Provided at No Charge: a. Guests
Taxable Yes or No: No.
Tax Type: Hotel Occupancy.
Additional Comments: Complimentary room means the hotel receives no
compensation for the room from any source.
3.b.
Revenue Description: Complimentary Rooms Provided at No Charge: b. Employees
Taxable Yes or No: No.
Tax Type: Hotel Occupancy.
Additional Comments: Hotel receives no compensation for the room from any
source. *An internal transfer of funds for the use of a room is subject to
tax.
3.c.
Revenue Description: Complimentary Rooms Provided at No Charge: c. Travel
Agents, Advertisers, etc.
Taxable Yes or No: No.
Tax Type: Hotel Occupancy.
Additional Comments: Hotel receives no compensation for the room from any
source. *An internal transfer of funds for the use of a room is subject to
tax, such as a room traded for advertising.
4.
Revenue Description: Early Departure Fee
Taxable Yes or No: No.
Tax Type: Hotel Occupancy
Additional Comments: Early departure fees are not taxable, *unless equal to
the room rate (see Guaranteed No Show Revenue).
5.
Revenue Description: Late Departure Fee
Taxable Yes or No: No.
Tax Type: Hotel Occupancy
Additional Comments: Late departure fees are not taxable, *unless equal to the
room rate (see Guaranteed No Show Revenue).
6.
Revenue Description: Cancellation Fees: A fee received because an event was
cancelled.
Taxable Yes or No: No.
Tax Type: Hotel Occupancy
Additional Comments: Cancellation fees are not taxable, *unless equal to the
room rate and cancellation is within 30 days of the scheduled stay (see
Guaranteed No Show Revenue).
7.
Revenue Description: Attrition/Fees: Fee charged because group did not
fulfill their total event commitment (Example: an event blocked 200 rooms, only
150 were rented and occupied, penalty charged for 50 rooms not rented).
Taxable Yes or No: Yes*.
Tax Type: Hotel Occupancy
Additional Comments: Attrition fees are taxable only if by paying the fee a
person achieves the right to use or possess the room. In the example given,
the group is charged the full price of rooms not rented and, therefore, the fee
is taxable. *An attrition fee, however, that is based on a percentage or
sliding scale is not taxable (see Guaranteed No Show Revenue).
8.
Revenue Description: Packages (example: golf, honeymoon, ski)
Taxable Yes or No: Yes.
Tax Type: Sales, Hotel Occupancy, or Mixed Beverage
Additional Comments: When the guest folio is lump sum the entire amount is
subject to hotel tax; when the folio separately states the room charge from the
other package items, only the room charge is subject to hotel tax. The other
separately listed package items may be subject to different taxes, such as
sales or mixed beverage. Rule 3.162 (a)
9.a.
Revenue Description: Rooms for resale sold to: a. Tour operators
Taxable Yes or No: Yes.
Tax Type: Hotel Occupancy
Additional Comments: Texas hotel tax laws do not have a resale provision.
Persons who resell hotel rooms and agents who obtain hotel rooms on behalf of
customers pay tax to the hotel. [For information on tax responsibilities of
persons who obtain rooms for others, see STAR documents 200212648L &
200208379L.]
9.b.
Revenue Description: Rooms for resale sold to: b. Meeting planners
Taxable Yes or No: Yes.
Tax Type: Hotel Occupancy
Additional Comments: Texas hotel tax laws do not have a resale provision.
Persons who resell hotel rooms and agents who obtain hotel rooms on behalf of
customers pay tax to the hotel. [For information on tax responsibilities of
persons who obtain rooms for others, see STAR documents 200212648L &
200208379L.]
9.c
Revenue Description: Rooms for resale sold to: c. Others who resale rooms
Taxable Yes or No: Yes.
Tax Type: Hotel Occupancy
Additional Comments: Texas hotel tax laws do not have a resale provision.
Persons who resell hotel rooms and agents who obtain hotel rooms on behalf of
customers pay tax to the hotel. [For information on tax responsibilities of
persons who obtain rooms for others, see STAR documents 200212648L &
200208379L.]
10.
Revenue Description: Banquet/Meeting Room Revenue (No Meals Served)
Taxable Yes or No: Yes*.
Tax Type: Hotel Occupancy
Additional Comments: When located inside the hotel (building with sleeping
rooms), collect the 6% state hotel tax. Local hotel taxes are only imposed on
sleeping rooms. *When located in a separate building than the hotel, do not
collect hotel tax. Rule 3.162(b)
11.a.
Revenue Description: Banquet/Meeting Room Revenue (Meals Served) a. Room
located inside hotel (building with sleeping rooms) - Separately stated
Taxable Yes or No: Yes.
Tax Type: Hotel Occupancy & Sales
Additional Comments: Collect sales taxes on the charge for food; collect the
6% state hotel tax (not local) on the charge for the banquet/meeting room.
Rule 3.293(f) & 3.162(b)
11.b.
Revenue Description: Banquet/Meeting Room Revenue (Meals Served) b. Room
located inside hotel (building with sleeping rooms) - Lump sum billing
Taxable Yes or No: Yes.
Tax Type: Hotel Occupancy
Additional Comments: Collect the 6% state hotel tax (not local). Rule
3.162(b)
11.c.
Revenue Description: Banquet/Meeting Room Revenue (Meals Served) c. Room
located in separate building than hotel - Separately stated or lump sum
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Collect sales taxes on the room charge, even when
separately stated. Rules 3.293(f)
11.d.
Revenue Description: Banquet/Meeting Room Revenue (Meals Served) d.
Alcoholic beverages are served
Taxable Yes or No: Yes.
Tax Type: Mixed Beverage
Additional Comments: The sale and service of alcoholic beverages is subject to
either mixed beverage gross receipts tax or sales taxes, depending on the type
of permit held by the hotel (see Food & Beverage Section). On lump sum charge
by a mixed beverage permittee, the portion attributable to the sale or service
of alcoholic beverages is subject to mixed beverage gross receipts tax. Rule
3.1001(c)
12.
Revenue Description: Pet Charges
Taxable: Yes
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is due on all charges for items or services,
other than personal services or the use of a telephone, that are furnished in
connection with the actual occupancy of the a room. This would include pet
charges. Rule 3.162(a)
13.
Revenue Description: Pet Cleaning Fees
Taxable: Yes
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is due on charges for cleaning and readying a
room for occupancy. Rule 3.162(a)
14.
Revenue Description: Child Care Expenses
Taxable: No
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is not due on separately stated charges for
personal services, except those related to cleaning and readying a room for
occupancy. A child care service is a personal service and not taxable. Rule
3.162(a)
15.
Revenue Description: Rollaway Bed Charges
Taxable: Yes
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is due on all charges for items or services,
other than personal services or the use of a telephone, that are furnished in
connection with the actual occupancy of the a room. This would include charges
for additional beds. Rule 3.162(a)
16.
Revenue Description: Refrigerator Charges
Taxable: Yes
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is due on all charges for items or services,
other than personal services or the use of a telephone, that are furnished in
connection with the actual occupancy of the a room. This would include charges
for in-room refrigerators. Rule 3.162(a)
17.
Revenue Description: Safe Charges
Taxable: Yes
Tax Type: Hotel Occupancy
Additional Comments: Hotel tax is due on all charges for items or services,
other than personal services or the use of a telephone, that are furnished in
connection with the actual occupancy of the a room. This would include charges
for in-room safes. Rule 3.162(a)
HOTEL ROOM REVENUE EXEMPTIONS
Jurisdiction: Texas
Revised Date: July 10, 2003
Non-Transient:
1.a.
Description: Can guest be considered non transient?
Tax Exempt Yes or No.: Yes
Time Period: 30 consecutive days
Tax Type: Hotel Occupancy
Documentation Required: Folio record showing room rental of more than 30
consecutive days, OR written notice of intention to rent for at least 30
consecutive days with proof person actually rented for the next 30 consecutive
days.
Additional Comments: To qualify, non transients (permanent residents) may
either occupy room for more than 30 consecutive days (pay tax on first 30 days
but exempt thereafter); OR give written notice of intention to stay at least 30
consecutive days and occupy room for the next 30 consecutive days (exempt
beginning when notice given). Any interruption in occupancy voids the
exemption. Rule 3.161(b)
1.b.
Description: If so, after how many consecutive days (time period)?
Tax Exempt Yes or No.: Yes.
Time Period: 30 consecutive days.
Tax Type: Hotel Occupancy
Documentation Required: See #1 above.
Additional Comments: Texas law provides a permanent resident exemption for
persons who have the right to occupy a room for 30 or more consecutive days.
Rule 3.161(b)
2.
Description: Can Corporations, Partnerships, and LLCs qualify as non
transient?
Tax Exempt Yes or No.: Yes.
Time Period: 30 consecutive days.
Tax Type: Hotel Occupancy
Documentation Required: Same as #1 above.
Additional Comments: The hotel must invoice and be paid by the same person
(corporation, partnership, LLC, etc.); exemption not dependent on the same
natural person occupying the room or that the same room be rented each night.
3.
Description: Can Airline Crew Rooms qualify as non transient?
Tax Exempt Yes or No.: Yes.
Time Period: 30 consecutive days.
Tax Type: Hotel Occupancy
Documentation Required: Contract showing rental of room(s) for more than 30
consecutive days.
Additional Comments: Different crew members may occupy different rooms, but
same number of rooms must be rented for at least 30 consecutive days. The
exemption applies to the number of rooms specified and rented for at least 30
consecutive days; for a range of rooms, it applies only to the lowest number of
rooms in the range plus any additional rooms rented at least 31 consecutive
days. Rule 3.161(b)
4.
Description: Is a written contract required for non transient status?
Tax Exempt Yes or No.: No.
Time Period: 30 consecutive days.
Tax Type: Hotel Occupancy
Documentation Required: Folio record showing room rental of more than 30
consecutive days, OR written notice of intention to rent for at least 30
consecutive days with proof person actually rented for the next 30 consecutive
days.
Additional Comments: A guest can become exempt on the 31st consecutive day of
occupancy and will remain exempt until there is an interruption in occupancy.
Rule 3.161(b)
5.a.
Description: After guests have met non transient requirements, a. Can taxes
be refunded from first date of stay?
Tax Exempt Yes or No.: Yes*.
Time Period: 30 consecutive days.
Tax Type: Hotel Occupancy
Documentation Required: Written notice of intention to stay for at least 30
consecutive days with folio record showing room rented for 30 or more
consecutive days.
Additional Comments: May refund tax back to date hotel received written notice
of intention to stay for 30 or more days; *otherwise, the first 30 days are
taxable. Rule 3.161(b)
5.b.
Description: After guests have met non transient requirements, b. Is it
required to collect taxes from day one if the contract exists?
Tax Exempt Yes or No.: No.
Time Period: 30 consecutive days.
Tax Type: Hotel Occupancy
Documentation Required: Copy of contract for stay of 30 or more consecutive
days.
Additional Comments: Even with contract/written notice, the hotel is liable if
the guest fails to pay for 30 consecutive days. The hotel may wish to collect
tax for first 30 days, then refund or credit the tax. Rule 3.161(b)
Federal, State, Local Government:
6.a.
Description: Federal Government employees qualify for exemption if: a.
Payment made directly by agency
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: Employees traveling on official business are exempt from
state and local hotel taxes; manner of payment does not affect the exemption.
Hotel may request a copy of a government ID, business card, or other
identification to verify exemption. Rule 3.161(b)
6.b.
Description: Federal Government employees qualify for exemption if: b.
Payment made by guest who is reimbursed by agency?
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: Employees traveling on official business are exempt from
state and local hotel taxes; manner of payment does not affect the exemption.
Hotel may request a copy of a government ID, business card, or other
identification to verify exemption. Rule 3.161(b)
7.a.
Description: State Government employees qualify for exemption if: a. Payment
made directly by agency
Tax Exempt Yes or No.: No*.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Not applicable, *except for designated state employees
(see 7.b. below).
Additional Comments: Texas state agencies and *most state employees are not
exempt. Rule 3.161(b)
7.b.
Description: State Government employees qualify for exemption if: b. Payment
made by guest who is reimbursed by agency?
Tax Exempt Yes or No.: No*.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: *Designated Texas state officials who present a Hotel
Tax Exemption Photo Identification Card and a completed hotel occupancy tax
exemption certificate (form 12-302).
Additional Comments: Most state employees are not exempt. *Certain Texas
officials - mostly heads of state agencies, district judges and above, and
members of state boards and commissions and the Texas Legislature - are exempt
from state and local hotel taxes. Rule 3.161(b)
8.a.
Description: Other state government employee qualify for exemptions if: a.
Payment made directly by agency
Tax Exempt Yes or No.: No.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Not exempt.
Additional Comments: Agencies from other states and their employees are not
exempt.
8.b.
Description: Other state government employee qualify for exemptions if: b.
Payment made by guest who is reimbursed by agency
Tax Exempt Yes or No.: No.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Not exempt.
Additional Comments: Agencies from other states and their employees are not
exempt.
9.a.
Description: Local government employees qualify for exemptions if: a.
Payment made directly by agency
Tax Exempt Yes or No.: No.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Not exempt.
Additional Comments: Local government agencies and their employees are not
exempt
9.b.
Description: Local government employees qualify for exemptions if: b.
Payment made by guest who is reimbursed by agency
Tax Exempt Yes or No.: No.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Not exempt.
Additional Comments: Local government agencies and their employees are not
exempt
10.
Description: Foreign Diplomats
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Present Tax Exemption Card issued by the U.S. Dept. of
State and a completed hotel occupancy tax exemption certificate (form 12-302).
Additional Comments: Foreign missions and diplomats that have received a hotel
tax exemption from the Office of Foreign Missions, U.S. Dept. of State, are
exempt from state and local hotel taxes. Rule 3.161(b)
Other:
11.
Description: Non profit organizations - 501(c)(3) Organizations
Tax Exempt Yes or No.: No.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Not exempt.
Additional Comments: 501(c)(3) organizations are not exempt.
12.
Description: Religious, Charitable, Scientific Organizations
Tax Exempt Yes or No.: Yes*.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Religious and charitable organizations complete a
hotel occupancy tax exemption certificate (form 12-302). *Scientific
organizations are not exempt.
Additional Comments: Exempt from state hotel tax only. Organization has
received Comptroller's letter of hotel tax exemption (may request copy).
Employees traveling on official business are also exempt. Method of payment
immaterial, except for non-employees who must pay by organization check, credit
card or direct billing. *Scientific organizations are not exempt. Rule
3.161(b)
13.a.
Description: Public Schools (elementary & secondary): a. In-state
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: In-state public schools are educational organizations and
exempt from state hotel tax in same manner as religious/charitable
organizations.
13.b.
Description: Public Schools (elementary & secondary): b. Out-of-state
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: Out-of-state public schools are educational organizations
and exempt from state hotel tax in same manner as religious/charitable
organizations.
14.a.
Description: Private Schools (elementary & secondary): a. In-state
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: In-state private schools are educational organizations
and exempt from state hotel tax in same manner as religious/charitable
organizations.
14.b.
Description: Private Schools (elementary & secondary): b. Out-of-state
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: Out-of-state private schools are educational
organizations and exempt from state hotel tax in same manner as
religious/charitable organizations.
15.a.
Description: Public & Private Universities and Colleges (insitutions of higher
education): a. In-state
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: In-state public & private universities/colleges are
educational organizations and exempt from state hotel tax in same manner as
religious/charitable organizations.
15.b.
Description: Public & Private Universities and Colleges (insitutions of higher
education): b. Out-of-state
Tax Exempt Yes or No.: Yes.
Time Period: Not Applicable.
Tax Type: Hotel Occupancy
Documentation Required: Completed hotel occupancy tax exemption certificate
(form 12-302).
Additional Comments: Beginning October 1, 2003, out-of-state public & private
universities/colleges do not qualify as educational organizations and are not
exempt from state hotel tax; *out-of-state institutions of higher education are
exempt for state hotel tax from September 1, 2001 to September 30, 2003.
FOOD AND BEVERAGE REVENUE
Jurisdiction: Texas
Revised Date: July 10, 2003
1.
Revenue Description: Restaurant Food Sales
Taxable Yes or No.: Yes.
Tax Type: Sales
Additional Comments: Sales of food ready for immediate consumption is subject
to sales taxes. Rule 3.293(b)
2.
Revenue Description: Beverage Sales (Liquor, Wine, and Beer)
Taxable Yes or No.: Yes.
Tax Type: Mixed Beverage or *Sales
Additional Comments: All sales of alcoholic beverages by the holder of a mixed
beverage permit, issued by the Texas Alcoholic Beverage Commission (TABC), are
subject to the 14% mixed beverage gross receipts tax. Mixed beverage tax is
imposed on and paid by the permit holder, not the customer. Rule 3.1001(b)
*Sales of beer and wine by the holder of a TABC issued wine and beer retailer's
permit are subject to sales taxes. Rules 3.289(a)
3.
Revenue Description: Beverage Sales (Carbonated, Fruit, Mixers)
Taxable Yes or No.: Yes.
Tax Type: Sales or *Mixed Beverage
Additional Comments: Except as noted, sales of carbonated beverages, diluted
fruit drinks, and mixers, even from minibars, are subject to sales taxes. Rule
3.293(a) *If the hotel holds a mixed beverage permit, carbonated drinks, fruit
juices, and mixers sold for the purpose of mixing with alcohol for on-premises
consumption are subject to mixed beverage gross receipts tax. Rule 3.1001(c)
and 3.289(a)
4.a.1.
Revenue Description: Gratuities: a. Voluntary 1. Fully Distributed
to Server
Taxable Yes or No.: No.
Tax Type: Sales or Mixed Beverage
Additional Comments: Voluntary gratuities are not subject to tax. Rules
3.337(b) & 3.1001(e)
4.a.2.
Revenue Description: Gratuities: a. Voluntary 2. Restaurant Retains
a Portion
Taxable Yes or No.: No.
Tax Type: Sales or Mixed Beverage
Additional Comments: Voluntary gratuities are not subject to tax. Rules
3.337(b) & 3.1001(e)
4.b.1.
Revenue Description: Gratuities: b. Mandatory: 1. Fully Distributed
to Server
Taxable Yes or No.: No.
Tax Type: Sales or Mixed Beverage
Additional Comments: Reasonable mandatory gratuities (20% of charge or less)
fully distributed to qualifying employees (e.g., wait staff, busboys,
bartenders, and wine stewards, but not janitorial personnel, chefs, cashiers
and dishwashers) are exempt. Mandatory gratuities are fully distributed when
total direct compensation due qualifying employees for a reporting equals or
exceeds the amount of gratuities collected. Rule 3.337(c) & 3.1001(c) *Any
portion above 20% related to the sale or service of alcoholic beverages by a
mixed beverage permit holder is a taxable mixed beverage receipt. Rule
3.1001(c)(7)
4.b.2.
Revenue Description: Gratuities: b. Mandatory: 2. Restaurant Retains
a Portion
Taxable Yes or No.: Yes.
Tax Type: Sales or Mixed Beverage
Additional Comments: Mandatory gratuities retained by the restaurant (or
distributed to nonqualifying employees) are taxable. The type of tax depends
on what the gratuity is based on (service of food or alcoholic beverages) and
type of TABC permit held. Rules 3.337(c), 3.289(c), & 3.1001(c)
5.
Revenue Description: Room Service Food and Beverage
Taxable Yes or No.: Yes.
Tax Type: Sales or Mixed Beverage
Additional Comments: Charges for ready to eat food are subject to sales taxes.
Rule 3.293(b) Charges for alcoholic beverages are subject to mixed beverage
tax or sales taxes depending on the TABC permit held. Rule 3.1001(c)
6.
Revenue Description: Room Service Separately Stated Delivery Charges
Taxable Yes or No.: Yes.
Tax Type: Sales or Mixed Beverage
Additional Comments: For sales tax, delivery charges associated with the sale
of a taxable item (e.g., food) are taxable. Rule 3.303(a). For mixed beverage
tax, delivery charges associated with the sale or service of alcoholic
beverages are taxable mixed beverage receipts. Rule 3.1001(c)
7.
Revenue Description: Cover or Minimum Charges
Taxable Yes or No.: Yes.
Tax Type: Sales or Mixed Beverage
Additional Comments: Cover charges, unless related to reduced prices for
alcoholic beverages, are subject to sales taxes as admissions to amusement
services. *Amusement services (e.g., cover charges) are exempt from sales
taxes when sold in a place listed in the National Register of Historic Places
or designated a Recorded Texas Historic Landmark. Rules 3.289(a) & 3.298(a) &
(g) Cover charges, however, related to reduced prices for alcoholic beverages,
no matter the location, are subject to mixed beverage gross receipts tax. Rule
3.1001(c) Minimum charges are also taxable, the type of tax determined by what
the charge is based on (food or alcohol) and the type of TABC permit held.
Rules 3.293(b) & 3.1001(c)
8.
Revenue Description: Corkage
Taxable Yes or No.: Yes.
Tax Type: Sales or Mixed Beverage
Additional Comments: Charges associated with the sale or service of alcoholic
beverages by a mixed beverage permit holder are subject to mixed beverage tax.
Rule 3.1001(c) *Charges related to the sale of beer or wine by the holder of a
wine and beer retailer's permit are subject to sales taxes. Rule 3.303(a)
9.a.
Revenue Description: Employee Meals: a. Provided Free of Charge
Taxable Yes or No.: No.
Tax Type: Sales
Additional Comments: Meals provided immediately before, during, or after a
shift to employees who prepare or serve food are not taxable. Rule 3.293(e)
9.b.
Revenue Description: Employee Meals: b. Provided for a Charge above Cost
Taxable Yes or No.: No.
Tax Type: Sales
Additional Comments: Meals provided immediately before, during, or after a
shift to employees who prepare or serve food are not taxable. Rule 3.293(e)
9.c.
Revenue Description: Employee Meals: c. Provided at Cost
Taxable Yes or No.: No.
Tax Type: Sales
Additional Comments: Meals provided immediately before, during, or after a
shift to employees who prepare or serve food are not taxable. Rule 3.293(e)
10.
Revenue Description: Complimentary Meals (No Separate Charges Made to
Guests)
Taxable Yes or No.: Yes.
Tax Type: Sales or Use
Additional Comments: While the guest does not owe tax, the hotel owes sales or
use tax on the cost of taxable ingredients. An internal transfer of funds for
a meal is also taxable. Rule 3.293(e)
11.a.
Revenue Description: Complimentary Beverages (No Separate Charges Made to
Guests): a. Liquor, Beer, and Wine
Taxable Yes or No.: Yes.
Tax Type: Sales or Use
Additional Comments: Taxable to the hotel based on the cost of taxable
ingredients, beer, and wine. Rules 3.1001(e) & 3.289(d)
11.b.
Revenue Description: Complimentary Beverages (No Separate Charges Made to
Guests): b. Carbonated Beverages
Taxable Yes or No.: Yes.
Tax Type: Sales or Use
Additional Comments: Taxable to the hotel based on the cost of the carbonated
beverages. Rule 3.293(e)
FOOD AND BEVERAGE REVENUE EXEMPTIONS
Jurisdiction: Texas
Revised Date: July 10, 2003
Federal, State, Local Government
1.a.
Revenue Description: Federal government employees qualify for exemption if:
a. Payment made directly by agency
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back), government purchase order, or proof of payment by approved government
credit card.
Additional Comments: Rule 3.322(c) and STAR Document 9901143L
1.b.
Revenue Description: Federal government employees qualify for exemption if:
b. Payment made by guest who is reimbursed by agency
Tax Exempt Yes or No.: No.
Documentation Required: Not Exempt
Additional Comments: Unlike hotel tax, there is no sales tax exemption solely
because an employee is traveling on behalf of an exempt entity. Sales taxes
are due on taxable purchases even when reimbursed for actual expenses or on a
per diem bases (e.g., meals, personal phone calls). Rule 3.322(g)
2.a.
Revenue Description: State government employees qualify for exemptions if:
a. Payment made directly by agency
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back), government purchase order, or proof of payment by approved government
credit card.
Additional Comments: Rule 3.322(c) and STAR Document 9901143L
2.b.
Revenue Description: State government employees qualify for exemptions if:
b. Payment made by guest who is reimbursed by agency
Tax Exempt Yes or No.: No.
Documentation Required: Not Exempt.
Additional Comments: See 1.b.
3.a.
Revenue Description: Other state government employees qualify for exemption
if: a. Payment made directly by agency
Tax Exempt Yes or No.: No.
Documentation Required: Not Exempt.
Additional Comments: Agencies from other states and their employees are not
exempt. Currently, there are no border state reciprocating agreements as
provided in Rule 3.322 (l).
3.b.
Revenue Description: Other state government employees qualify for exemption
if: b. Payment made by guest who is reimbursed by agency
Tax Exempt Yes or No.: No.
Documentation Required: Not Exempt.
Additional Comments:
4.a.
Revenue Description: Local government employees qualify for exemptions if:
a. Payment made directly by agency
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back), government purchase order, or proof of payment by approved government
credit card.
Additional Comments: Rule 3.322(c) and STAR Document 9901143L
4.b.
Revenue Description: Local government employees qualify for exemptions if:
b. Payment made by guest who is reimbursed by agency
Tax Exempt Yes or No.: No.
Documentation Required: Not Exempt.
Additional Comments: See 1.b.
5.
Revenue Description: Foreign Diplomats
Tax Exempt Yes or No.: Yes.
Documentation Required: Present Tax Exemption Card issued by the U.S. Dept. of
State.
Additional Comments: Foreign missions and diplomats that have received a sales
tax exemption card from the Office of Foreign Missions, U.S. Dept. of State,
are exempt from sales taxes.
Other:
7.
Revenue Description: Non profit organizations - 501(c)(3) organizations
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back).
Additional Comments: Only if purchased for the exempt purpose of the exempt
organization; an exemption certificate should be obtained.
8.
Revenue Description: Religious, charitable, scientific organizations
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back)
Additional Comments: Only if purchased for the exempt purpose of the exempt
organization; an exemption certificate should be obtained.
9.a.
Revenue Description: Public Schools (elementary & secondary): a. In-state
Tax Exempt Yes or No.: Yes.
Documentation Required: See 1.a.
Additional Comments:
9.b.
Revenue Description: Public Schools (elementary & secondary): b.
Out-of-state
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back)
Additional Comments: School granted exemption as educational [see Exemption
Note below]; purchases are for the exempt purpose of the school and an
exemption certificate is obtained.
10.a.
Revenue Description: Private Schools (elementary & secondary): a. In-state
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back)
Additional Comments: Only if purchased for the exempt purpose of the exempt
organization; an exemption certificate should be obtained.
10.b.
Revenue Description: Private Schools (elementary & secondary): b.
Out-of-state
Tax Exempt Yes or No.:
Documentation Required: Completed sales tax exemption certificate (form 01-339
back)
Additional Comments: School granted exemption as educational [see Exemption
Note below]; purchases are for the exempt purpose of the school and an
exemption certificate is obtained.
11.a.
Revenue Description: Public & Private Universities and Colleges a. In-state
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back)
Additional Comments: Only if purchased for the exempt purpose of the exempt
organization; an exemption certificate should be obtained.
11.b.
Revenue Description: Public & Private Universities and Colleges b.
Out-of-state
Tax Exempt Yes or No.: Yes.
Documentation Required: Completed sales tax exemption certificate (form 01-339
back)
Additional Comments: School granted exemption as educational [see Exemption
Note below]; purchases are for the exempt purpose of the school and an
exemption certificate is obtained.
Exemption Note: Charitable, educational, and religious organizations exempt
for sales taxes are listed on the Comptroller's Web site at:
http://window.state.tx.us/taxinfo/exempt/xmptsearch.html
OTHER ROOM CHARGES
Jurisdiction: Texas
Revised Date: July 10, 2003
Other Room Charges
1.a.
Revenue Description: Telephone Charges: a. Local Charges (Mark up on Carrier
Charges)
Taxable Yes or No: Yes.
Tax Type: Sales and TIF
Additional Comments: Collect 61/4% state sales tax; collect local sales tax,
but only for local jurisdictions that tax telecommunications services. Rule
3.344(b) & (i) Telephone charges are also subject to the Telecommunication
Infrastructure Fund (TIF) assessment (due on markup if hotel did not issue
resale certificate to service provider). Rule 3.1101(b)
1.b.
Revenue Description: Telephone Charges: b. Long Distance Intrastate (Mark up
on Carrier Charges)
Taxable Yes or No: Yes.
Tax Type: Sales and TIF
Additional Comments: Collect 61/4% state sales tax; collect local sales tax,
but only for local jurisdictions that tax telecommunications services. Rule
3.344(b) & (i) Telephone charges are also subject to the TIF assessment (due
on markup if hotel did not issue resale certificate to service provider). Rule
3.1101(b)
1.c.
Revenue Description: Telephone Charges: c. Long Distance Interstate (Mark up
on Carrier Charges)
Taxable Yes or No: Yes.
Tax Type: Sales and TIF
Additional Comments: Collect 61/4% state sales tax; not subject to local sales
taxes. Rule 3.344(b) & (I) Telephone charges are also subject to the TIF
assessment (due on markup if hotel did not issue resale certificate to service
provider). Rule 3.1101(b)
2.
Revenue Description: If telephone charges are taxable, does jurisdiction give
credit for taxes paid to the telephone company?
Taxable Yes or No: N/A.
Tax Type: Sales and TIF
Additional Comments: Hotels may issue a resale certificate to the telephone
service provider (hotel would owe use tax on its use of telephone services); or
it may take a credit for tax paid to service providers on a subsequent sales
tax return. TIF assessments are based on "taxable telecommunications receipts"
as reported on the hotel's sales tax returns.
3.a.
Revenue Description: Guest Laundry/Dry Cleaning: a. Hotel is retailer &
seller of services
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Laundry services are taxable. Rule 3.310(b)
3.b.
Revenue Description: Guest Laundry/Dry Cleaning: b. Outside vendor performs
services, bills guest & pays commissions to hotel
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. *Commissions
paid to the hotel are not subject to tax.
3.c.
Revenue Description: Guest Laundry/Dry Cleaning: c. Outside vendor performs
services, bills hotel & hotel marks up charges to guests
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The hotel issues the vendor a resale certificate and
collects tax from the guest on total charge, including the mark up.
3.d.
Revenue Description: Guest Laundry/Dry Cleaning: d. Outside vendor performs
services, bills guest & there is no markup or commission
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest.
4.a.
Revenue Description: Pay Per View Television: (The Pay Per View provider
owns and services equipment in hotel. Services & selections are controlled by
provider. The provider, not the hotel is the seller of the pay per view
service) a. Vendor is responsible for remitting the tax
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Vendor remits tax only if invoicing the hotel guest
directly.
4.b.
Revenue Description: Pay Per View Television: (The Pay Per View provider
owns and services equipment in hotel. Services & selections are controlled by
provider. The provider, not the hotel is the seller of the pay per view
service) b. Hotel is responsible for remitting the tax
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: If the hotel invoices the guest, then the hotel issues
the Pay Per View provider a resale certificate and collects tax from guests.
5.
Revenue Description: Video Game Rental
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Rental of tangible personal property is taxable. Rule
3.294(b)
6.
Revenue Description: Internet Charges
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Internet access services are taxable. Although the first
$25 of the monthly fee is exempt, hotels often cannot track charges per guest.
Because they do not know when to start collecting tax, hotels often collect tax
on all services. Rule 3.366(b)
7.
Revenue Description: If Internet charges are taxable, does jurisdiction give
credit for taxes paid to the Internet company?
Taxable Yes or No: N/A.
Tax Type: Sales
Additional Comments: The hotel may issue a resale certificate to the Internet
access service provider (hotel would owe use tax on its use of the Internet
service); or the hotel may take a credit for tax paid on a subsequent sales tax
return.
8.a.
Revenue Description: Self-Parking: a. Hotel is retailer & seller of services
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Hotel collects tax on charges to park or store a motor
vehicle. Rule 3.315(a)
8.b.
Revenue Description: Self-Parking: b. Outside vendor performs services,
bills guest & pays commissions to hotel
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. Rule 3.315(a)
*Commissions paid to the hotel are not subject to tax.
8.c.
Revenue Description: Self-Parking: c. Outside vendor performs services,
bills hotel & hotel marks up charges to guests
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The hotel issues the vendor a resale certificate and
collects tax from the guest on the total charge, including any mark up, for the
parking service. Rule 3.315(a)
8.d.
Revenue Description: Self-Parking: d. Outside vendor performs services,
bills guest & there is no markup or commission
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. Rule 3.315(a)
9.a.
Revenue Description: Valet-Parking: a. Hotel is retailer & seller of
services
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Hotel collects sales tax on charges to park or store a
motor vehicle. Rule 3.315(a)
9.b.
Revenue Description: Valet-Parking: b. Outside vendor performs services,
bills guest & pays commissions to hotel
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. Rule 3.315(a)
*Commissions paid to the hotel are not subject to tax.
9.c.
Revenue Description: Valet-Parking: c. Outside vendor performs services,
bills hotel & hotel marks up charges to guests
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The hotel issues the vendor a resale certificate and
collects tax from the guest on the total charge, including any mark up, for the
parking service. Rule 3.315(a)
9.d.
Revenue Description: Valet-Parking: d. Outside vendor performs services,
bills guest & there is no markup or commission
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. Rule 3.315(a)
10.a.
Revenue Description: Garage-Parking: a. Hotel is retailer & seller of
services
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Hotel collects sales tax on charges to park or store a
motor vehicle. Rule 3.315(a)
10.b.
Revenue Description: Garage-Parking: b. Outside vendor performs services,
bills guest & pays commissions to hotel
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. Rule 3.315(a)
*Commissions paid to the hotel are not subject to tax.
10.c.
Revenue Description: Garage-Parking: c. Outside vendor performs services,
bills hotel & hotel marks up charges to guests
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The hotel issues the vendor a resale certificate and
collects tax from the guest on the total charge, including any mark up, for the
parking service. Rule 3.315(a)
10.d.
Revenue Description: Garage-Parking: d. Outside vendor performs services,
bills guest & there is no markup or commission
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Outside vendor collects tax from guest. Rule 3.315(a)
MISCELLANEOUS REVENUE AND PURCHASES
Jurisdiction: Texas
Revised Date: July 10, 2003
Gift Shop
1.
Revenue Description: Retail Video Rental
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Rental of tangible personal property is taxable. Rule
3.294(b)
2.
Revenue Description: Retail Food Sales
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Collect tax on the sale of food ready for immediate
consumption. Rule 3.293(b)
3.
Revenue Description: Retail Candy
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Candy sales are taxable. Rule 3.293(b)
4.
Revenue Description: Retail Beer/Wine Sales
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The gift shop must have the appropriate permit from the
Texas Alcoholic Beverage Commission (TABC).
5.
Revenue Description: Retail Clothing
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Sale of tangible personal property.
6.
Revenue Description: Retail Non-Food Sales
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Sale of tangible personal property.
7.
Revenue Description: Newspapers
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Newspapers with an average sales price per copy over a
30-day period that does not exceed $1.50 are exempt (average price of $.75
until September 1, 2003). Rule 3.299(a)
8.
Revenue Description: Periodicals
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Sales of magazines, news journals, and other periodicals
that do not meet the definition of an exempt newspaper are taxable. Rule
3.299(b)
Miscellaneous Sales:
9.
Revenue Description: Telephone Commissions received from Pay Phones
Taxable Yes or No: No*.
Tax Type: Sales
Additional Comments: Commissions paid to the hotel are not taxable. *If the
hotel owns the pay phones, then the receipts are subject to sales tax. Rule
3.344(b)
10.
Revenue Description: Prepaid Telephone Cards
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The sale of a prepaid telephone card is the sale of
tangible personal property, effective 09/01/1997, unless sold from a vending
machine for a $1 or less. Rule 3.344(a)
11.
Revenue Description: Fax Charges
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: A charge to send a fax is the sale of a
telecommunications service. *A charge to receive a fax is taxable only when it
originated in Texas. Rule 3.344(d)
12.
Revenue Description: Xerox Copy Charges
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: A charge for a copy is the sale of tangible personal
property.
13.
Revenue Description: Equipment Rental (example: audio visual equipment)
Taxable Yes or No: Yes.
Tax Type: Sales and Hotel Occupancy
Additional Comments: Hotel pays sales tax at time of purchase. Collect state
(not local) hotel tax when provided in conjunction with the rental of a meeting
room. Rule 3.162(a)
14.
Revenue Description: Commissions earned from equipment rentals provided by
outside equipment vendor
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Commissions paid to the hotel are not taxable.
15.
Revenue Description: Vending Machine Sales (hotel maintains machine)
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Hotel is responsible for tax, reported as described in
Rule 3.293(g) for vending machines.
16.
Revenue Description: Vending Commissions (vendor maintains machine)
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Vendor is responsible for tax, reported as described in
Rule 3.293(g) for vending machines.
17.
Revenue Description: . Commissions earned from room service meals provided by
leased restaurant
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Commissions paid the hotel are not taxable.
18.a.
Revenue Description: Lease of Real Property: a. Space in hotel lobby
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Providing lobby space to a person or organization, such
as space for a registration table, is not taxable.
18.b.
Revenue Description: Lease of Real Property: b. Space for restaurant
Taxable Yes or No: No.
Tax Type: Hotel Occupancy
Additional Comments: An individual or business that has the right to use or
possess a room in a hotel for at least 30 consecutive days (e.g., one-year
lease) is exempt from hotel tax. Rule 3.161(b)
18.c.
Revenue Description: Lease of Real Property: c. Space for gift shop
Taxable Yes or No: No.
Tax Type: Hotel Occupancy
Additional Comments: An individual or business that has the right to use or
possess a room in a hotel for at least 30 consecutive days (e.g., one-year
lease) is exempt from hotel tax. Rule 3.161(b)
19.
Revenue Description: Commission on Automatic Teller Machines (ATM's)
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Commissions paid to the hotel are not taxable.
Miscellaneous Purchases
20.
Revenue Description: Consulting Services
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Consulting services are not taxable, unless connected to
the sale of a taxable item.
21.
Revenue Description: General Services
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Some services are taxable, so individual services need to
be specified.
22.
Revenue Description: Janitorial Services
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Janitorial services are taxable to the hotel at the time
of purchase. Rule 3.356(b)
23.
Revenue Description: Professional Services
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Some services are taxable, so individual services need to
be specified.
24.
Revenue Description: Cleaning Supplies
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Cleaning supplies are taxable to the hotel at the time of
purchase.
25.
Revenue Description: Pool Maintenance
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Swimming pool maintenance (e.g., clean,
chemically clean, balance chemicals, vacuum, etc.) is a taxable real property
service. Rule 3.356(b)
26.
Revenue Description: Security Service
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Security services are taxable.. Rule 3.333(b)
27.
Revenue Description: Salvage Sales
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at time of purchase.
28.
Revenue Description: Uniforms
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at time of purchase.
29.
Revenue Description: Cleaning of Uniforms
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at time of purchase. Rule 3.310(b)
30.
Revenue Description: Maintenance Contracts on Hotel Equipment
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at time of purchase. Rule 3.292(b) & (c)
31.
Revenue Description: Freight Charges
Taxable Yes or No: Yes*.
Tax Type: Sales
Additional Comments: Freight charges are taxable when connected to the sale of
a taxable item. *Charges by a third party to only transport an item are not
taxable. Rule 3.303(a) & (b)
32.
Revenue Description: Lease of Tangible Personal Property for Hotel Use
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Normally the lease of tangible personal property is
taxable, but individual items need to be specified.
PURCHASES
Jurisdiction: Texas
Revised Date: July 10, 2003
Hotel Operations Purchases
1.
Description: In-Room amenities provided with the guest room: shampoo, soap,
toilet paper, laundry bag
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
2.
Description: In-Room coffee provided at no charge to guests
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Coffee, unless ready for immediate consumption, is an
exempt food item. Rule 3.293(b)
3.
Description: In-Room cookies provided at no charge to guests
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Individual sized bakery products purchased in quantities
of six or more are not taxable. Rule 3.293(b). Beginning October 1, 2003, all
bakery items purchased without plates and/or eating utensils are exempt.
4.
Description: Newspapers provided to guests
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Newspapers with an average sales price per copy over a
30-day period that does not exceed $1.50 are exempt (average price of $.75
until September 1, 2003). Rule 3.299(a)
5.
Description: Linens and towels
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
6.
Description: Coffeemakers for in-room guests
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
7.
Description: Flowers
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Tax is due either from the hotel or the guest. If a
separate charge is made, the guest owes tax on the flowers and the hotel issues
a resale certificate to vendor.
8.
Description: Promotional materials (tangible personal property)
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
9.
Description: Promotional (non-tangible personal property) (examples: media,
advertising, etc.)
Taxable Yes or No: No*.
Tax Type: Sales
Additional Comments: The purchase of advertising time (television, radio) or
advertising space (newspapers, billboards) is not taxable. *Tax is due,
however, on charges to produce an advertisement in a camera ready format. Rule
3.321(c)
10.
Description: Operating supplies
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
Food and Beverage Purchases
11.
Description: China, glassware, and utensils
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
12.
Description: Linens
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
13.
Description: Operating supplies
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
14.
Description: Disposable napkins, plates, cups, etc. provided with meal
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Hotel restaurants may issue resale or exemption
certificates to suppliers for nonreusable supplies or wrapping and packaging
materials. Rule 3.293(f)
Capital Assets
15.
Description: Capital assets - General
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: The purchase of tangible personal property is taxable.
16.
Description: Computer - hardware
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase. Rule
3.308(a)
17.
Description: Computer - software
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase. Rule
3.308(b)
18.
Description: Furniture and fixtures - for hotel
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
19.
Description: Televisions, telephones, and other electronics
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase, even when
guests are separately charged for use of the equipment.
20.
Description: Office equipment - for hotel
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
21.
Description: Furniture and fixtures - for restaurant
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
22.
Description: Kitchen machinery and equipment
Taxable Yes or No: Yes*.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase. *Kitchen
equipment used to cook, mix, chop, or blend food or beverages that are sold
qualify as manufacturing equipment and may be purchased tax-free on exemption
certificates. Rule 3.300(d)
23.
Description: Office equipment - for restaurant
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
24.
Description: Telephone switching equipment
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at the time of purchase.
25.
Description: New construction of real property
Taxable Yes or No: No*.
Tax Type: Sales
Additional Comments: New construction labor is not taxable, *but the
incorporated materials are (either to the contractor or the hotel, depending on
the type of contract). Rule 3.291(b)
26.
Description: Repair of real property
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Nonresidential repair and remodeling labor and the
incorporated materials are taxable, no matter the type of contract. Rule
3.357(b)
27.
Description: Installation of tangible personal property
Taxable Yes or No: Yes*.
Tax Type: Sales
Additional Comments: Taxable when associated with the sale of tangible
personal property (TPP) or taxable service. Third party assembly of TPP is
taxable fabrication. Rule 3.300(a) Installation of TPP that becomes reality
in a hotel is taxable remodeling. Rule 3.357(b) *Third party installation of
TPP that remains TPP is not taxable.
28.
Description: Repair of tangible personal property
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at time of repair. Rule 3.292(b)
29.
Description: Fabrication of tangible personal property
Taxable Yes or No: Yes.
Tax Type: Sales
Additional Comments: Taxable to the hotel at time of fabrication. Rule
3.300(b)
30.
Description: Sale of business
Taxable Yes or No: No*.
Tax Type: Sales
Additional Comments: The sale of the entire operating assets of a business or
a division, branch or identifiable segment of a business sold in a single
transaction to a single purchaser is an occasional sale and is not taxable.
*The sale of the business to several purchasers or through several transactions
is not an occasional sale and is taxable. Rule 3.316(d)
MISCELLANEOUS INFORMATION
Jurisdiction: Texas
Revised Date: July 10, 2003
Franchise/Management Revenue
1.
Revenue Description: Management Fees
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Management fees and services are not taxable, unless in
conjunction with the sale of a taxable item.
2.
Revenue Description: Franchise Fees
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Fees paid for a franchise (e.g., hotel, restaurant) are
not taxable.
3.
Revenue Description: Marketing Fees
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments:
4.
Revenue Description: Reservation Fees
Taxable Yes or No: Yes.
Tax Type: Hotel Occupancy
Additional Comments: All charges for services directly related to room
occupancy, except personal services, are taxable.
5.
Revenue Description: Reimbursement of expenses at cost
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Charges incurred by the hotel that are identified on an
invoice or folio as a "reimbursement" are not subject to tax. Reimbursements
include tax paid, if any.
6.
Revenue Description: Travel agent commission reimbursement
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments: Commissions are not taxable.
Miscellaneous
5.
Revenue Description: Are US postmarks acceptable as timely filings?
Taxable Yes or No: N/A.
Tax Type: Sales
Additional Comments: Yes, returns should be filed or postmarked on or before
the due date. If the due date falls on a Saturday, Sunday, or legal holiday,
the next business day will be the due date.
6.
Revenue Description: Is a business license required for the management
company?
Taxable Yes or No: No*.
Tax Type: Sales and Hotel Occupancy
Additional Comments: There is no management company license; *but a company
that manages a hotel would need to register to collect and pay hotel and other
taxes, as required.
7.
Revenue Description: Are local taxes subject to state taxes?
Taxable Yes or No: No.
Tax Type: Sales
Additional Comments:
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