Do I need to collect hotel occupancy taxes on cancellation fees?

We get this question all the time, and the answer is, probably not.  A special rule applies to whether hotel occupancy taxes are imposed on a hotel room rental cancellation fee.

A 1989 Texas Comptroller’s hearing concluded that hotel taxes are not due on charges to guests who 1) cancel more than 30 days before the scheduled stay begins, or 2) when the charge to the guest is less than the reserved room rate. This rule applies both to individual reservations and also to group contracts.

To state that in reverse, hotel taxes are only due on a room cancellation charge assessed within 30 days of the scheduled stay, and for the full amount of the reserved room rate.

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