A hotel and its on-site restaurant are commonly owned but separately incorporated. Guests can pay one bundled price for room-plus-meal (with the hotel doing an internal 'book transfer' payment to the restaurant), or a lower room-only price. Is hotel tax or sales tax due, is the internal book transfer itself taxable, and can the hotel give the restaurant a resale certificate for it?

Plain-English summary

This ruling is also indexed as a separate sales tax document at STAR 200810565L.

A hotel and the restaurant inside it are owned by the same person but set up as two separate corporations. Guests get a choice: pay one bundled "American Plan" price for a room plus a meal in the restaurant, or pay a lower price for just the room. When a guest picks the bundled price, the hotel internally transfers the meal's portion of the price to the restaurant via an accounting "book transfer" (no separate invoice or payment actually changes hands with the guest). The operator asked three questions:

1. What's the basis for collecting hotel tax here? Hotel occupancy tax is due on the TOTAL consideration for lodging — and since the meal charge isn't separately stated on the guest's invoice, hotel tax applies to the ENTIRE bundled charge, not just a "room portion" of it.
2. Is the internal book transfer from the hotel to the restaurant itself a taxable transaction? Yes — that book transfer is consideration for the sale of a meal under Tax Code § 151.005, so the restaurant must collect ordinary sales tax from the hotel on that internal payment.
3. Can the hotel give the restaurant a resale certificate for that book transfer, to avoid double taxation? No — a resale certificate only works if the item is actually being "resold" to the end customer. Since the guest is charged one bundled price with no separate meal charge, there's no identifiable "resale" of the meal to point to — so the hotel/restaurant transaction is a straight taxable sale between the two corporations, not a tax-exempt sale-for-resale.

Net effect: the SAME meal effectively gets taxed twice in this structure — once as sales tax when the restaurant "sells" it to the hotel via the book transfer, and again as hotel occupancy tax on the guest's full bundled room-plus-meal price (since the meal isn't separately stated to the guest).

What this means for you

Hotels with a commonly-owned but separately incorporated on-site restaurant

If you run an American Plan (bundled room + meal) package through two separate corporate entities, structure your internal invoicing carefully — an internal book transfer for the meal is a real, sales-tax-triggering transaction between the two entities, and you can't shield it with a resale certificate unless the meal is ALSO separately stated on the guest's bill.

Hotels considering whether to itemize meal charges separately

Separately stating the meal charge to the guest could change both the hotel-tax treatment (only the lodging portion would then be hotel-tax-subject, with sales tax on the meal instead) and potentially open up resale-certificate treatment for the internal restaurant transaction — but this ruling only addresses the bundled, non-itemized scenario as presented.

Commonly-owned but separately incorporated hospitality businesses generally

Being under common ownership doesn't collapse two separate corporations into one taxpayer — transactions between them (like this book transfer) are treated as real, independent, taxable sales unless a specific exemption or resale mechanism actually applies.

Common questions

Q: If a hotel doesn't itemize the meal charge, is hotel tax due on the whole bundled price?
A: Yes, per this ruling — hotel occupancy tax applies to the entire charge when the meal isn't separately stated.

Q: Is an internal "book transfer" between a hotel and its commonly-owned restaurant a real taxable sale?
A: Yes, per this ruling — it's treated as consideration for the sale of a meal, and the restaurant must collect sales tax on it from the hotel.

Q: Can the hotel avoid that sales tax with a resale certificate since the meal is ultimately for the guest?
A: No, per this ruling — a resale certificate requires an actual resale of the item to the end customer, and there isn't one here since the guest's invoice doesn't separately charge for the meal.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.005 (book transfer as consideration for a sale)
• 34 Tex. Admin. Code Rule 3.162 (Hotel Occupancy Tax)
• 34 Tex. Admin. Code Rule 3.293(j) (bundled room/meal charges)

Cited prior guidance:

• STAR document 8411L0622B10 (book transfers as taxable consideration)
• STAR documents 9709463L and 200607817H (resale certificates require an actual resale to the end customer)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200810189L

Original ruling text

This document is also indexed as a sales tax document under STAR 200810565L.

From: Kirk Davenport

Sent: Wednesday, October 15, 2008 3:12 PM

To: **

Cc: Steve White; Donald Dillard

Subject: Single price for meal provided to hotel guest

Dear **:

Thank you for contacting our office with questions concerning meals provided to

hotel guests.

You describe a situation where a hotel and a restaurant located within the

hotel are owned by the same person, but are two separate corporations. Guests

staying at the hotel have the option of either paying a single price for a room

and a meal in the restaurant or a lower price for only a room. When a guest

chooses the higher single price, the hotel completes a book transfer to the

restaurant for the price of the meal. You asked the following questions.

Question: What is the basis for collecting the hotel occupancy tax in the above

situation?

ANSWER: Hotel occupancy tax is due on the total consideration received for

lodging. If the charge for the meal is not separated on the invoice to the

guest then hotel tax is due on the entire charge. See Hotel Rule 3.162 and

Sales Tax Rule 3.293(j), Texas Administrative Code.

Question: Is the book transfer from the hotel to the restaurant for the price

of a meal a taxable transaction?

ANSWER: Yes. The book transfer received by the restaurant from the hotel is

consideration for the sale of a meal. The restaurant should collect sales tax

from the hotel. See Section 151.005, Texas Tax Code, and STAR document

8411L0622B10.

Question: Can the hotel give the restaurant a resale certificate for the book

transfer of a meal when the price of the meal is included in a single charge to

the hotel guest?

ANSWER: No. The hotel cannot give the restaurant a resale certificate when

the guest is invoiced a single price for lodging and meal. The meal is not

considered resold to the hotel guest unless a separate charge is made. See

STAR documents 9709463L and 200607817H.

This opinion is based on the facts presented and current law. Other facts

though similar may provide a different result.

If I may be of further assistance, please e-mail me at

[email protected] or call me toll free at (800) 531-5441, ext.

3-3849. My Fax number is (512) 475-0900.

Kirk Davenport

Oil & Gas, Fuels & Miscellaneous Taxes Section

Tax Policy Division

Comptroller of Public Accounts

P.O. Box 13528 Austin, Texas 78711

512.463.3849 (phone)

512.475.0900 (fax)

[email protected]