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Local Hotel Occupancy Taxes

Hotel sign

If your city doesn’t have a hotel, then local hotel occupancy taxes may not apply to your city. However, just what is a hotel? The answer may surprise you. The definition of “hotel” found in Tax Code Section 156.001 includes uses such as hotel, motel, tourist home, tourist house, tourist court, lodging house, inn, rooming house, and bed and breakfast.  As of 2015, “hotel” includes a short-term rental, defined as the rental of all or part of a residential property to a person who is not a permanent resident (one who stays at least 30 consecutive days).

That change in the law specifically made stays in Airbnb-type housing subject to the hotel occupancy tax.  The Comptroller has contracted with Airbnb and others to collect the state hotel occupancy tax and remit to the Comptroller.  A city must collect the municipal hotel occupancy tax itself.  Thus, even if your city does not have what the average person thinks of as a hotel, the Tax Code has a broader definition of a hotel.

One possible addition to this is due to House Bill 550. If enacted, HB 550 would broaden the permissible uses for hotel occupancy tax revenue to include some qualified infrastructure projects and public parks. These would include roads, streets, highways, bridges, overpasses and underpasses, or interchanges.  The projects must be related to the entrance to a hotel, or part of the shortest route between a hotel and a state highway, interstate highway, public beach, visitor information center or convention center.  Other qualified infrastructure projects are water supply systems, sanitary sewer systems and storm drainage systems that provide service to a hotel. Lastly, the tax could be used for a public park improvement project, so long as the park is owned by the municipality and is located not more than one mile from a hotel.

If the city does have a hotel, then there is a statutory requirement for the municipality to file their yearly reports to the Comptroller regarding the local hotel occupancy tax, as required by Texas Tax Code Section 351.009.  Your report must contain the city’s hotel occupancy tax (HOT) rate, the revenue gained by that tax in the previous year, and the percentage of that revenue that the city spent for various projects:  convention or information centers; convention delegates registration; advertising to attract tourists; arts promotion and improvement; historical restoration and preservation; and signage directing the public to signs and attractions. This year’s deadline for the report is February 20th, 2023. If you don’t know whether your city has a hotel, as defined by the Tax Code, please reach out to your attorney.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice.

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