If a 501(c)(3) organization bundles hotel lodging, meals, and tuition into one lump-sum price for an educational seminar, does it owe sales tax on the meals and hotel tax on the lodging?

Subject

Educational Seminar Run By Exempt Organization — Lump-Sum Charge For Tuition, Meals, And Lodging

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9311L1274A01

Plain-English Summary

A 501(c)(3) exempt organization asked the Comptroller whether purchases it makes for meals and lodging are taxable. The organization buys meals and lodging from a lodge (billed as separate charges), then packages that lodging and those meals together with tuition for an educational seminar and sells the whole package to the public for a single lump-sum price. There is no markup on the lodging or meals portion of the price, and the organization does not control the lodging itself.

The Comptroller split the answer in two:

• Meals are exempt. The separate charge for meals is exempt from sales tax, and the organization may issue an exemption certificate for the meals — regardless of whether they're consumed at the lodge or off-site. The letter cites Sections (b)(5) and (f)(1) of Rule 3.322.
• Lodging is still taxable. Even though the organization is a 501(c)(3), that status does not exempt it from hotel occupancy tax. The organization should pay applicable hotel taxes on the lodging cost. Hotel tax is also due on any banquet or meeting room rental if that room is located in the same building as the sleeping accommodations. The letter cites Section (b) of Rule 3.162.

A closing note in the letter explains why the lump-sum seminar package itself isn't treated as a taxable "package deal" under Rule 3.165: because the organization doesn't control the hotel rooms, it isn't a hotel operator, and it isn't required to collect hotel tax under Section 156.053 — that obligation stays with the lodge that actually operates the rooms.

What This Means For You

If you're a nonprofit or exempt organization running educational seminars with bundled meals and lodging: Your 501(c)(3) status shelters the meals from sales tax (with a proper exemption certificate) but does not shelter lodging from hotel occupancy tax. Expect to pay hotel tax on the lodging cost even while treating the meals as exempt.

If your seminar package includes a banquet or meeting room: Check whether that room is in the same building as the sleeping rooms. If it is, this letter says hotel tax applies to that room rental too, not just the sleeping rooms.

If you don't control the hotel rooms you're reselling as part of a package: According to the note at the end of this letter, that fact keeps you out of "package deal" treatment under Rule 3.165 and out of hotel-operator status under Section 156.053 — the hotel tax collection duty stays with whoever actually operates the lodging.

Caution: This is a fact-specific 1993 letter addressed to one taxpayer; the Comptroller expressly says the opinion could change with different facts, and letters like this can only be relied on by the taxpayer who received it.

Q&A

Q: Does the exempt organization owe sales tax on the meals it provides at the seminar?
A: No. The letter says the separate charge for meals is exempt from sales tax, and the organization may issue an exemption certificate for the meals, whether consumed at the lodge or off-site (citing Rule 3.322(b)(5) and (f)(1)).

Q: Since the organization is a 501(c)(3), is it exempt from hotel tax on the lodging it provides?
A: No. The letter states directly that as a 501(c)(3) organization, it "is not entitled to an exemption from the hotel tax" and should pay applicable hotel taxes on the lodging cost.

Q: Is hotel tax owed on a meeting room used for the seminar?
A: Yes, if that meeting or banquet room is located in the same building as the sleeping accommodations — the letter says hotel tax is also due in that situation, citing Rule 3.162(b).

Q: Does bundling tuition, meals, and lodging into one lump-sum price make this a taxable "package deal"?
A: According to the letter's closing note, no — because the organization does not control the hotel rooms, this is not a taxable package deal under Rule 3.165, and the organization is not a hotel operator required to collect hotel tax under Section 156.053.

Original ruling text

November 30, 1993

Dear **:

Thank you for your letter of October 29, 1993, regarding the
taxability of purchases made by **. You asked if purchases
made by the organization for meals and lodging are taxable.

As I understand it, *, a 501 (c)(3) exempt organization,
purchases meals and lodging from the ** operated by the
* . The fee billed for lodging is separate from the fee
billed for meals. * then packages the lodging and meals with
the tuition for an educational seminar and sells the packaged deal
to the general public for a lump-sum price. There is no mark up in
the price for lodging and meals. **** does not have control of
the lodging.

The separate charge for meals is exempt from sales tax. * may
issue an exemption certificate for the meals whether consumed at the
lodge or off site. Please refer to Sections (b)(5) and(f)(1) of
Rule 3.322.

However, as a 501(c)(3) organization, * is not entitled to an
exemption from the hotel tax. * should pay applicable hotel taxes
for lodging cost. Hotel tax is also due on banquet or meeting room rental
if the banquet or meeting rooms are located in the same building as the
sleeping accommodations. Please refer to Section (b) of Rule 3.162.

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

If you have any questions or need additional information, you may call
toll free 1-800-531-5441, ext. 5-0037. The regular Austin number is
512-475-0037. You also may write to Tax Administration Division.

Sincerely,

Lindey Osborne
Tax Administration Division

NOTE: This is not a taxable package deal (Rule 3.165) since *
does not control the hotel rooms. * is not a hotel operator
required to collect hotel tax. (Section 156.053)

NOTE: Previous Accession Number 9311119L.2 and/or 9311119L