How did Texas divide a guest ranch's packaged and separately stated charges between hotel and sales tax?

Plain-English summary

A lump-sum charge for a room, board, and included services was subject to hotel occupancy tax. The same applied to a hunting package combining lodging, meals, and two hunts per day. When a stay was long enough that hotel tax did not apply, separately stated meals, amusement, and other items still had to be tested under sales tax.

Separately charged horseback rides were taxable under sales tax, while charges for additional game were not. Swim-club memberships, guest swimming, and separately stated concerts or theater performances were taxable amusement services.

A mandatory gratuity was not subject to hotel tax. The portion tied to a separately taxable horseback ride was subject to sales tax, so the ranch needed to separate the charges or use one hotel-taxed lump sum as described.

Conference-space rental was not subject to sales tax, but hotel tax applied to banquet or meeting rooms in a building with sleeping accommodations. A lump sum for the room, meals, and beverages bore hotel tax; separately stated meals and beverages bore sales tax. Audio-visual equipment rental was taxable unless included in the hotel-taxed lump sum.

STAR warns that the letter's 14% mixed-beverage gross-receipts treatment changed in 2014 under HB 3572. The historical mixed-drink discussion does not state current rates or policy.

Common questions

Did a room-and-meals package bear sales tax on each component? No. The lump sum was subject to hotel occupancy tax.

Were separate horseback rides taxable? Yes.

Was additional harvested game taxable? No, according to the letter.

Were swim-club and guest-swimming fees taxable? Yes, as amusement services.

Does the letter's mixed-beverage rate remain current? No. STAR flags a statutory change effective in 2014.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8904L0928A05

Original ruling text

Note: This document is also indexed as a hotel occupancy tax document, STAR 8904348L.

ALERT: 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.

April 3, 1989

Dear **:

This is in response to your letter of March 21, 1989, concerning the taxability
of the various charges made to guests at your ranch. As I said in my
acknowledgment letter to you, I could find no record of our having received
your original letter, dated July 20, 1988.

Hotel occupancy tax is due on lump-sum charges for room, board, and other
services included in the lump-sum charge. If a room is rented for such a period
of time that the hotel occupancy tax is not due, then the charges for meals,
amusement services, and other services or items would have to be separately
stated and taxed under sales tax, if applicable.

The sample invoice that you submitted is not acceptable for the following
reasons. You have added a mandatory 15% gratuity based on the total of a charge
subject to hotel occupancy tax and the separately stated charge for additional
horseback rides, which are taxed under sales tax. Mandatory gratuities, as
outlined in Rule 3.337 are subject to sales tax. Gratuities are not subject to
hotel occupancy tax. The portion of the gratuity related to the charge for
horseback rides is taxable under sales tax. You should either separately state
all of your charges or charge one lump-sum amount for everything.

The lump-sum charge for hunters that includes room, meals, and hunting twice a
day is also subject to hotel occupancy tax. Again the separate charge for
horseback riding is subject to sales tax. The mandatory gratuity charges may
present the same problems as outlined in the preceding paragraph. The charge
for additional game is not subject to sales tax.

The fees for membership in the swim club and fees for guest swimming are
taxable as amusement services. Separately stated charges for a musical concert,
theatre performance, etc. are subject to sales tax. Rental of conference space
is not subject to sales tax; however, hotel tax is due on the rental of a
banquet or meeting room located in a building having sleeping accommodations. A
lump-sum charge for conference room, meals and beverages would be subject to
hotel tax. Separately stated charges for meals and beverages are subject to
sales tax. Mixed drinks are not subject to sales tax if the receipts are taxed
under the 14% gross receipts tax paid to the Alcoholic Beverage Commission.

Rental of audio/visual equipment is subject to limited sales tax unless
included in the lump-sum charge subject to hotel occupancy tax.

Several sales and hotel tax rules are included for your reference.

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 me if you have any additional questions. You may
write me, call toll-free 1-800-531-5441 from anywhere in the United States or
phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence

March 31, 1989

Dear **:

This is to acknowledge receipt of your letter of March 21, 1989. I could find
no record of our having received your original letter, dated July 20, 1988.
Perhaps it was lost in the mail.

You will receive a written response concerning the taxability of the various
charges made to guests at your ranch as soon as possible.

Please feel free to contact me if you have any additional questions. You may
write me, call toll-free 1-800-531-5441 from anywhere in the United States or
phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence

March 21, 1989

Bob Bullock
Comptroller of Public Accounts
Capitol Station
Austin, TX 78774

Dear Sir;

Last March we went through a costly sales tax audit. We had not been collecting
the taxes properly. At the close of the audit Lori Halverson, a supervisor in
the ** office, advised us to send a letter to you outlining our
policies and billings for you to review and advise us of any revisions that
were needed.

We sent a letter to you July 20, 1988 outlining our facility and billing
practices. We have not had any response to our letter. We are anxious to know
whether we are collecting the hotel and sales taxes properly so we can avoid
any penalties.

Enclosed is a copy of the letter that was sent in July along with a sample of
our billing. We would appreciate having you review our letter and made any
recommendation or revisions that are needed.

Thank you. We look forward to your reply.

Sincerely,

July 20, 1988

Bob Bullock
Comptroller of Public Accounts
Capitol Station
Austin, TX. 78774

Dear Sir:

**, is a guest ranch, providing sleeping accommodations, 3 meals
per day, and the use of all recreational facilities covered by a per person per
day rate. The weekly rate includes one horseback ride per person per day and
therefore is included in the package and charged 6% hotel tax. For stays of
less than 1 week, horseback riding is charged separately and 6.5% Sales Tax is
attached to horseback riding only.

Gift items, and extra meals not included in the daily rate are charged 6.5%
sales tax.

As per instructions from Dan Cremeens, telephone conversation, June 17, 1988,
we are NOT charging tax on RV hookups.

We understand that contracted musical groups are not taxable if they are billed
separately; if they are included in a package rate the musical groups are
subject to hotel tax.

** also has several groups that use our conference space. We have
several questions concerning the billing of the conference space.

1.) We understand that the conference space is NOT taxable if meals are not
served in that room.

2.) Are beverages that are consumed in the conference room taxed? Are they
taxed if they are included as a package? Are they taxed if they are billed
separately?

3.) Are audio/visual aids that are used in the conference area taxed?

Also, we offer day leases during the hunting season. The daily rate includes
accommodations, meals, facilities, transportation to the blinds, and 1 kill
(either a doe or spike buck). The hunters are charged for any additional game
taken - is the additional game taxable?

During the summer months we have a swim club membership. The members purchase
either a single or family membership. Any guests they bring are charged $1.50 a
visit. We have been collecting 6 1/2% sales tax on both the membership fees and
the fee for guests. We hope we have been correct in the collection of the sales
tax.

We understand that the billing is very important when considering the tax. If a
packaged rate is offered and we itemize on the invoice to show what the package
has included, does that make the individual items taxable as separate items
rather than as a whole packaged rate?

We have enclosed a sample of our billing invoice, a brochure and rate sheet, a
hunting letter, explaining our hunting charges, and our swim club rules. We ask
that you please examine our billing practices and advise us of any additions we
need to make, revisions that are needed and any recommendations you may have.

Thank you.

Sincerely,