How did Texas divide sales tax and hotel occupancy tax on lodging packages with meals, instructional programs, and health-club or spa access?

Plain-English summary

The Texas Comptroller said that when meals were included in a lodging charge subject to Hotel Occupancy Tax, the entire charge was subject to Hotel Occupancy Tax. The letter did not identify another conflict between the hotel and sales-tax rules.

Charges for activities primarily instructional in nature were not subject to sales tax, while admission to health clubs and spas was taxable. If a lump-sum package would include hotel-taxable charges when separated, Hotel Occupancy Tax applied to the total and separate statement was not required.

If the room was rented long enough that Hotel Occupancy Tax no longer applied, the hotel was treated as using the American Plan under Rule 3.293(b)(5), and the meals became subject to sales tax. Health-club or spa admission or membership then also had to be separately stated and taxed under sales tax.

The taxpayer also asked whether a corporate block of rooms rented for more than 30 consecutive days was exempt regardless of changing occupants. This record does not answer that question; the letter says a separate Hotel Occupancy Tax response would address it.

What this means for you

The tax result depended on whether the lodging itself remained subject to Hotel Occupancy Tax and whether program charges were instructional or access to a taxable club or spa. Bundling could place the whole charge under hotel tax, while a long-term stay could shift meals and separately stated amenities into sales tax.

Common questions

Were meals bundled with hotel-taxable lodging separately subject to sales tax? No. The entire charge followed Hotel Occupancy Tax.

Were instructional-program charges subject to sales tax? No.

Were health-club and spa charges subject to sales tax? Yes.

What happened when the stay was long enough to end hotel tax? Meals were taxed under the American Plan rule, and club or spa charges had to be separately stated and taxed.

Did this record answer the corporate 30-day room-block question? No.

Citations and references

• Comptroller Rule 3.165 — hotel occupancy tax rule cited in the letter.
• Comptroller Rule 3.293 and Rule 3.293(b)(5) — food, meals, and the American Plan.
• Comptroller Rule 3.298 — sales-tax rule enclosed for reference.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8701L0793G06

Original ruling text

This document is also indexed as a hotel tax document under STAR 8701478L.

January 9, 1987

Dear ***:

Thank you for your recent letter regarding both Hotel and Sales Tax. Mr.
Harold Culp will respond to the Hotel Occupancy Tax issues under separate
cover.

Question:
1) Is the hotel tax and the sales tax mutually exclusive? If the hotel
tax applies, does the sales tax not apply? If the sales tax applies, does
the hotel tax not apply? Which tax takes precedent?

Answer:
Where charges for meals are included in the charge for lodging and the
charge for lodging falls under the Hotel Occupancy Tax, the entire charge
will be subject to the Hotel Occupancy Tax. I am not aware of any other
area in which Rules 3.165 and 3.293 are in conflict.

Question:
2) Is the revenue from the Education and Wellness Programs exempt from
the sales tax and hotel tax? If so, under what circumstances? Must the
charges for seminar, room and meals be separately stated?

Answer:
Charges for activities that are primarily instructional in nature are not
subject to sales tax. Charges for admission to health clubs and spas are
subject to sales tax. Where the charge is a lump sum amount and hotel
tax
would be due if the charges were separated, Hotel Occupancy Tax would be
due
on the total amount. You are not required to separately state the charges
under these circumstances.

If the room is rented for such a period of time that Hotel Occupancy Tax
is
no longer due, the hotel will be considered to be using The American Plan
as
explained in Rule 3.293(b)(5) and the meals taxed under sales tax. Any
charges for health club or spa admission or membership would also have to
be
separately stated and taxed under sales tax.

Question:
3) If a block of rooms is rented to a corporation for more than thirty
consecutive days, is the revenue exempt from hotel tax regardless of
how many different people occupy the rooms during the thirty day period?

Answer:
Harold Culp will respond to this in his letter.

Question:
4) If meals are not separately stated on the bill, is the value subject
to
sales tax, hotel tax or both?

Answer:
See Answer #1 above.

I am enclosing Sales Tax Rules 3.293 and 3.298 for your reference.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,

Al Van Allen
Tax Policy Section
Tax Administration Division