Was tax due on complimentary laundry and dry-cleaning services provided without charge to key hotel staff under hotel valet contracts?

Plain-English summary

Association members performed valet laundry and dry cleaning for hotels. The hotels provided exemption certificates to the cleaners, and the requester said the hotels collected and remitted sales tax on the valet cleaning.

Some valet contracts also required free cleaning for key hotel staff. The Comptroller said no tax was due on that complimentary cleaning because there was no charge.

The cleaner nevertheless owed use tax on materials that it had bought tax-free and then gave with the complimentary cleaning.

Common questions

Was sales tax due on the complimentary cleaning? No, because the cleaning was provided without charge.

Who owed tax on materials used or given with the free cleaning? The cleaner owed use tax on materials purchased tax-free and given with the complimentary cleaning.

What arrangement did the letter describe for ordinary valet cleaning? The cleaners received exemption certificates from hotels, and the requester said the hotels collected and remitted the sales tax.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8608L0751E02

Original ruling text

August 29, 1986

Dear ***:

Thank you for your recent letter which is restated with response below.

I would like to request written clarification on the sales tax liability
for complimentary laundry and dry cleaning done under hotel valet
contracts.

Many of our association members do valet work for hotels and, as a
general practice, they are provided an exemption certificate and do
not collect sales tax from the hotel on valet cleaning. The hotel, in
turn, collects the sales taxes and remits them to your office.

Most valet contracts also call for some complimentary cleaning for
key hotel staff at no charge. My basic question is: Is there any
sales tax due on complimentary cleaning and if there is, who is
responsible to collect and remit it?

Because there is no charge for the cleaning, no tax is due. The cleaner
would owe use tax on materials purchased tax free and given with the
complimentary cleaning.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You
may write us, call toll free 1-800-252-5555 from anywhere in Texas or
phone 512/463-4600.

Sincerely,

Tax Policy Section
Tax Administration Division