There are often questions about whether the permanent resident exemption to the state and local hotel occupancy tax applies to a given situation, and at what point in time the guest becomes tax exempt. This practical guide provides hoteliers with answers to their most frequent questions on the “30-Day Exemption” and prescribes procedures to ensure proper documentation of this exemption for audit purposes.

What is the hotel occupancy tax “permanent resident exemption?

When the hotel occupancy tax was first adopted in 1959, the Texas Legislature recognized the need to exempt long-term guests from paying hotel occupancy taxes. This exemption ensures that hotel guests staying over 30 days are taxed the same as residents staying at extended-stay properties, apartments, corporate rental facilities, and rental houses. The Texas Legislature continues to recognize the importance of this principle, and provides for permanent resident exemptions from both state and local hotel occupancy taxes for guests, regardless of the type of accommodation the guest selects.

Who qualifies as a “permanent resident?”

The Texas Tax Code states that any “person” who has the right to use or possess a lodging room for at least 30 consecutive days is exempt from state and local hotel occupancy taxes, provided there is no interruption in payment for the room during this period. In Texas, a “person” also includes a corporation or business. Therefore, one should look to whether the same person or corporate entity or business paid for the room for that entire period.

When does a guest qualify for the permanent resident exemption?

If in advance or upon check-in, the guest provides written notice of intent to occupy a guest room for 30 days or longer, no tax will be due for any part of the guest’s stay if the guest stays for more than 30 days. A signed registration card indicating a guest’s intent to occupy a room for 30 days or longer is sufficient evidence. A written reservation or confirmation of a reservation that indicates the stay will be more than 30 days is also sufficient notice.

In addition, a hotel is permitted to honor the 30-day permanent resident exemption even in cities with a 30-day check out requirement if the guest immediately checks back in so that the stay remains continuous to meet state law requirements.

If a guest does not provide notice of intent to stay 30 days or longer, when does the guest become exempt from hotel occupancy taxes?

If no notice is provided upon check-in that can be documented by a written agreement (guest reservation, confirmation, registration, or folio or separate agreement), the first 30 days of the guest’s stay are not tax-exempt. However, the guest becomes automatically tax exempt on the 31st day of their stay—regardless of whether there was prior notice of the guest’s intent to stay for 30 days or more, as long as there has been no interruption in payment for the room and the payment for the room is from one source for the entire time period.

If a guest has a reservation for over 30 days, may the hotel choose to continue to collect hotel occupancy tax during the guest’s stay?

THLA recommends hoteliers collect hotel occupancy taxes from the guest for the first 30 days of the guest’s stay. On the 31st day of the guest’s stay, provided there is no interruption of payment for the room and there was written notice or a reservation indicating the guest’s intent to stay 30 days or longer, the hotel should refund the collected hotel occupancy taxes for the first thirty days. This protects the hotel from incurring tax liability should the guest check out before staying at least 30 days. An exception would be possible if the guest paid in advance for the entire 30 days and there was no allowance for a refund if the guests checks out early.

What if the guest checks out before he or she has stayed 30 days?

If the guest checks out prior to staying 30 consecutive days, hotel occupancy taxes are due for the guest’s entire stay, regardless of whether there was written notice or agreement that the guest would stay 30 days or longer. Again, THLA recommends hoteliers collect occupancy taxes for the first 30 days of the guest’s stay to avoid the hotel being liable for the tax should the guest check out early.

A few days after checking in, a guest provides written notice of her intent to stay 30 days or longer. When does the guest become exempt from hotel occupancy taxes?

In this situation, the guest would not be tax exempt for the days this room was occupied prior to notifying the property of her intent to stay 30 days or more. The guest will likely become tax-exempt beginning the day notification was given to the hotel, although the hotel should continue to collect hotel occupancy tax for the next 30 days. Thirty-one days after the guest notifies the hotel that the guest intends to stay 30 days or longer, the hotel should refund the collected tax from the date the guest provided notice to present.

If the guest checks out for a day or fails to make payment on the occupied room, would this affect his/her tax exempt status?

The Texas Tax Code requires uninterrupted payment for thirty consecutive days for an individual or company to qualify for the permanent resident exemption. If the guest fails to make payment or checks out prior to completing a 30-day stay, they would not qualify for the permanent resident exemption.

Note, however, that permanent residents are not required to physically occupy a hotel room. The guest can leave the room for extended periods of time, provided the guest is still paying for the room and the guest still has the right to occupy the room.

Is a company eligible for a permanent resident exemption if the company rents a room for more than 30 days but houses different employees in the rented room?

Texas statutes treat the term “person” to include more than just individuals. In this case, entities such as companies, corporations, and other organizations are treated as “persons” under Texas law. If a company pays for the rental of a hotel room then the company is eligible for a permanent resident exemption. The company may allow different employees to occupy the room, provided the company meets the requirements of the exemption—renting the room for at least 30 consecutive days with no interruption of payment. The company renting the room qualifies for the hotel occupancy tax exemption—not the individual who is occupying the room. The right to the exemption is not impacted by different individuals checking in and out of the room, or individuals switching which room they occupy, as long as the company paying for the room pays for an uninterrupted 30-day period and the payment is from one source for the entire time period.

Is a company eligible for the permanent resident exemption if the company workers are using separate company credit cards?

To be eligible for the permanent resident exemption, the same form of payment must be used for the entire stay from the same entity. It is not permissible to have separate workers using separate company credit cards to pay for the room even where there is a continuous stay. The guest stay can be linked to a direct bill account utilizing one credit card or another form of payment for the entire stay. It is also permissible to have a direct bill account with company worker hotel guests using different credit cards exclusively for incidental charges.

What documentation should hoteliers keep for audit purposes?

To avoid potential issues when undergoing an audit, THLA recommends that lodging properties stay alert of correspondence from audit companies. A notice letter, phone call and/or email is usually sent to hotel operators well in advance of an audit company performing its audit. The notice letter will contain important information about how to be prepared so that auditors can perform their services in a smooth and efficient manner. The notice letter will likely list for the hotelier those items that must be produced, often including:

1. Local hotel occupancy tax returns for four years
2. Monthly gross room revenue reports for four years (either electronic or hard copies are permissible)
3. Monthly exempt room revenue reports for the last four years (either electronic or hard copies are permissible)
4. Any backup documentation for tax exemptions over the last four years

***The next page is a condensed one-page permanent resident tax exemption guide. Included is an example form for hotel guests to fill out and sign indicating their intent to stay for more than 30 days.

Permanent resident form: Guests who stay for more than 30 days

The permanent resident exemption applies to both state and local hotel taxes. Any person (individual, corporate entity, business, or other entity) who has the right to use or possess a lodging room for at least 30 consecutive days is exempt from state and local hotel occupancy taxes, provided there is no interruption in payment for the room during this period.

Option 1: If in advance or upon check-in, the guest provides notice to a hotel of intent to occupy a guest room for 30 days or longer, no hotel tax is due for any part of a guest’s stay.

Although not strictly required, THLA strongly recommends a separate signed registration card or confirmed reservation indicating a guest’s intent to occupy a room for 30 days or longer. This will serve as sufficient written evidence of the guest’s intent to stay for more than 30 consecutive days. For example, the hotel may complete the below box, have the guest sign, and retain this form on file at the property: 

Hotel Name and Address: __________________________________________

_______________________________(print Guest’s name) hereby provides notice to the lodging property of the Guest’s intent to stay more than thirty (30) consecutive days at the lodging property.

Guest folio # or confirmation #: ____________

Date of notice: ___________________

Date of check-in: __________________

Guest’s signature: __________________

Best Practice: It is recommended that hoteliers collect hotel occupancy taxes from the guest for the first 30 days of the guest’s stay. On the 31st day of the guest’s stay, provided there is no interruption of payment for the room and there was prior written notice or a reservation indicating the guest’s intent to stay 30 days or longer, the hotel should refund the collected hotel occupancy taxes for the first thirty days. This protects the hotel from incurring tax liability should the guest check out before staying at least 30 days.

Option 2: If no notice of the guest’s intent to stay more than 30 days is documented, the first 30 days of the guest’s stay are not tax-exempt.

The guest’s stay becomes automatically hotel tax exempt on the 31st day, regardless of whether there was prior notice of the guest’s intent to stay for 30 days or more, as long as there has been no interruption in payment for the room. However, the first 30 days are taxable in this situation. Collect hotel occupancy taxes from the guest for the first 30 days, and remit those collected hotel occupancy taxes to the city, county (if applicable) and the Texas Comptroller. Do not collect any additional hotel tax from the guest after 30 days, provided the guest’s stay remains uninterrupted.

If you have questions, do not hesitate to contact THLA:  512-474-2996 or news@texaslodging.com.