Experienced Legal Representation for Controversies Involving Texas Hotel Occupancy Taxes
Hotels (a term that is defined broadly under the Texas Tax Code) are subject to various tax obligations. As a result, a comprehensive approach to compliance is critical, and hotel owners must ensure that they have the documentation needed to demonstrate compliance to the Texas Comptroller when necessary. Hotels and hotel owners that cannot demonstrate compliance can face steep penalties, including criminal penalties in some cases.
At Brown PC, we assist hotels with all aspects of Texas state and local tax compliance. This includes defending hotels and their owners during high-stakes audits and investigations. We provide representation for matters involving Texas hotel occupancy taxes and other applicable taxes statewide, and our lawyers can provide representation on an urgent basis when necessary.
5 Key Aspects of Hotel Tax Compliance in Texas
There are several aspects to hotel tax compliance in Texas. While this makes compliance difficult, the difficulties involved are not an excuse for underpaying the taxes owed. With this in mind, here are five key considerations:
1. The Definition of a “Hotel”
For purposes of state and local tax compliance in Texas, the term “hotel” includes not only hotels, motels, and inns, but most other types of accommodations as well. Crucially, this includes short-term rentals offered on platforms like Airbnb and VRBO. As the Texas Comptroller explains, “bed and breakfasts, condominiums, apartments and houses,” can all qualify as “hotels” under Texas law.
2. Hotel Occupancy Taxes
Hotel occupancy taxes are owed on all qualifying rental stays. The state hotel occupancy tax rate is 6%, and municipalities and counties may also charge hotel occupancy taxes. Hotels must collect occupancy tax at the time of rental and remit it on the 20th day of the month following the month in which the tax is collected (or the end of the quarter for quarterly filers).
3. Hotel Sales and Use Taxes
Hotels are also required to collect and remit sales tax on taxable goods and services. While certain goods may be eligible for Texas’s “sale for resale” exemption, hotels must account for these goods appropriately. Amusement services and parking services are two examples of “taxable services” for which hotels may need to collect and remit sales tax.
4. Hotel Franchise Taxes
While Texas does not have an income tax, hotels must pay the state’s franchise tax if their revenue exceeds the state’s reporting threshold. Franchise tax revenue is calculated as a percentage of revenue, and franchise tax reports are due annually in May. Like all state taxes in Texas, unpaid hotel franchise taxes carry both interest and penalties.
5. Hotel Property Taxes
Hotels may owe property taxes in addition to the taxes discussed above. Inaccurate appraisals and other issues can leave hotels facing inflated property tax assessments, and successfully challenging these assessments can be critical to avoiding unwarranted liability. While property owners must generally begin by challenging their assessments at the local level, they can ultimately go to court if necessary.
How Our Texas Hotel Tax Lawyers Can Help
We provide comprehensive tax representation for hotels, hotel chains, short-term rental owners, and other clients across Texas. Our services include:
- Hotel Tax Compliance – Our lawyers can help you gain a comprehensive understanding of your hotel’s tax obligations and implement a compliance strategy focused on tax mitigation.
- Hotel Tax Audits – Our lawyers have extensive experience representing clients in audits conducted by the Texas Comptroller. If you are facing a hotel tax audit, we can help.
- Hotel Tax Collections – We can also help if you are facing collection action related to your hotel’s tax liability. The Texas Comptroller and local authorities have various collection mechanisms at their disposal.
- Hotel Tax Settlements – In appropriate cases, we work with the Texas Comptroller and local authorities to settle our hotel clients’ tax liability for less than the full amount they owe.
- Hotel Tax Litigation – Our lawyers have extensive experience in tax litigation. This includes both civil litigation involving unfavorable audit determinations and criminal tax enforcement cases.
FAQs: Hotel Occupancy Taxes in Texas
What charges are subject to the hotel occupancy tax?
As the Texas Comptroller explains, “[s]tate hotel occupancy tax applies to charges of $15 or more per day for sleeping accommodations, meeting rooms, and banquet rooms in a hotel or motel. The tax also applies to lodging at bed and breakfasts, condominiums, apartments, and houses rented for less than 30 consecutive days.” Local occupancy taxes may also apply to rentals of sleeping accommodations.
What are the penalties for late filing?
The penalties for delinquent hotel occupancy taxes in Texas are 5% for the first 30 days and 10% thereafter. Delinquent hotel occupancy taxes also begin incurring interest 61 days after the due date.
Can hotels claim a “sale for resale” exemption on consumables?
Yes, hotels can claim Texas’s “sale for resale” exemption for eligible consumables. To qualify for the exemption, eligible consumables must be included in the hotel’s accommodation fee rather than being billed separately.
How do I dispute a hotel occupancy tax assessment?
Disputing a hotel occupancy tax assessment involves dealing with the Texas Comptroller. Due to the complexity of the process (and the risk that the Comptroller will impose additional tax liability rather than issue a refund), engaging experienced tax counsel is strongly recommended.
What should I do if I am facing a “hotel” tax audit in Texas?
If you are facing a “hotel” tax audit in Texas as a short-term rental owner or the owner or operator of any other type of lodging, we strongly recommend engaging experienced tax counsel in this scenario as well. Hotel tax audits can pose substantial risks, and an informed, strategic defense is critical to avoiding unnecessary consequences.
Speak with a Texas Hotel Occupancy Tax Lawyer in Confidence
If you would like to speak with a Texas hotel occupancy tax lawyer at Brown PC, we invite you to get in touch with us. Call 888-870-0025 or contact us confidentially online to request an appointment today.