THLA Tax Tip:  Don’t Forget to Collect State (but not local) Hotel Taxes on Attached Meeting Room Rentals

It is easy to get confused about which taxes to collect on the rental of a meeting room or banquet room. Unfortunately, the law on point is itself confusing:

For example, did you realize that state hotel taxes are due on the rental of a meeting room, but local city and county hotel taxes are not due on the rental? And, did you know that if that meeting room is located in a building that is physically separate from the hotel, no hotel taxes are due at all? But, if food is served at the meeting, sales taxes may be due.  

Confused yet?

THLA can help. Here is a simple explanation on which taxes need to be collected in which scenario:

The meeting room/banquet room is located in the same building as hotel sleeping rooms:

  • If the meeting room/banquet room rental has a separate line-item on the guest’s bill:  
    • Collect the State of Texas 6% hotel occupancy tax.
    • Do not collect local city or county hotel occupancy taxes.
    • Collect sales tax on any food sold.  You may also need to collect mixed beverage sales tax.
  • If the meeting room/banquet room is lump-sum billed with other F&B charges:
    • Collect the State of Texas 6% hotel occupancy tax on the lump-sum charge.
    • Do not collect local city or county hotel occupancy taxes.

The meeting room/banquet room is located in a building that is physically separate from hotel sleeping rooms:

  • Do not collect state, city, or county hotel occupancy taxes (unless the meeting room charges are lump-sum billed with sleeping room charges; see above as if the banquet room were connected to the hotel).
  • If food and beverages are served, collect sales tax on the entire charge, even when the banquet/meeting room rental charges and food charges are separately stated.  A charge for the facility is an expense connected with the sale of the meal.

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

 

8 comments on “THLA Tax Tip:  Don’t Forget to Collect State (but not local) Hotel Taxes on Attached Meeting Room Rentals

  1. Jessica on

    What if the hotel charges service charge of 22% on the banquet room, what is the sales tax amount charged on the service charge? hotel occupancy tax or sales tax?

    Reply
    • Monica Whitlock on

      Great question Jessica. You should only charge sales tax on top of the service fee. In Texas this is between 6.25% and 8.25%, depending on the location of the hotel.

      For example, let’s say the banquet room charge is $100.00. The service charge is 22%. The subtotal to be taxed is $122.00. Final total with all applicable taxes and service charges would be $132.06 ($122.00 x 8.25%). Thanks again for your question and please don’t hesitate to reach out to us anytime.

      Reply
  2. Jennifer on

    What if there is alcohol served in the meeting room (separate from hotel rooms), and food served.

    Is there a mixed beverage (alcohol) tax AND state sales tax, or just one or the other?

    Reply
    • Justin Bragiel on

      Hi Jennifer, for purposes of this question, we are going to assume that all charges are separately stated on the guest’s receipt, invoice, or statement. Mixed beverages and other alcoholic beverages sold are subject to the Texas mixed beverage sales tax, the cost of the food served will be subject to sales tax, and the cost of the meeting room rental is subject to state hotel occupancy tax.

      Be sure to label each tax on the guest’s receipt, invoice, or statement.

      Also, note that separately, the hotel property will owe the State for the 6.7% mixed beverage gross receipts tax. This tax is calculated on all alcoholic beverages sold by the property, but it is paid by the hotel property and not by the hotel guest.

      Reply
    • Justin Bragiel on

      Johnny, great question. Assuming the audio-visual equipment rental charge is separately stated on the guest’s bill, the A-V equipment charges will either be subject to hotel occupancy taxes or subject to sales tax, depending on whether the hotel provides food for the event. If the hotel provides food for the event, the A-V equipment rental charge will be subject to sales tax. If the hotel does not provide food for the event, state hotel occupancy taxes are due.

      Note that if the A-V equipment rental charge is not separately stated on the guest’s bill, i.e. the A-V equipment rental is part of a “lump sum” charge for the rental of the room, the entire charge is subject to state hotel occupancy tax.

      This Texas Comptroller opinion might also be helpful to review.

      Reply
    • Justin Bragiel on

      Maria, this is a great question. No sales or mixed beverage taxes are due because the charge is not for the sale of food or beverages. It is instead a charge for the cancellation of a contract.

      Reply

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