Texas Comptroller of Public Accounts STAR System
HEARING NO. 32,105
IN RE: **************
TAXPAYER NO.: **************
AUDIT OFFICE: **************
AUDIT PERIOD: 04/01/90 THROUGH 06/30/92
HOTEL OCCUPANCY TAX
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
Administrative Law Judge
Representing Tax Division
At the oral hearing, Rene Trevino, the examining auditor, testified for the Tax
Division as did **************, formerly with the Comptroller's office and now
with the Texas Lottery. Testifying for the Petitioner were **************
That it provides exempt educational programs to school bands and choruses by
producing music festivals. However, the festivals are not a package sold by
Petitioner, but rather a promotion where the Petitioner is the tax-free
schools' agent in obtaining hotel rooms. Thus, hotel tax is mistakenly
assessed. [Tax Code 151.310(a)(1) exempts schools from sales tax for
FINDINGS OF FACT
1. Petitioner organizes and operates educational music festivals for
middle school and secondary school music groups, such as bands, choirs and
orchestras. Each school participating in the festivals performs a program of
music that is critiqued and judged by a panel of leading music directors. The
audit period incorporates Petitioner's first operating season.
2. Petitioner contracts with the schools to participate in the festivals.
Petitioner does not contract with the students directly. If the school does
not pay for the festival timely, Petitioner contacts first the music director,
then an administrator at the school (generally the principal), and then the
school board. Petitioner does not seek to collect the festival fees from the
students directly. The checks issued to pay for the festivals come generally
from school or school district accounts, but not from the students.
3. When participating in the festivals, the schools are classified
according to University Interscholastic League (UIL) classifications, such as
5A, 4A, etc. The schools must perform musical pieces from the UIL performance
list. The students in the music groups are usually given academic credit for
their participation, and generally rehearse during school hours. The bands,
choirs and orchestras must receive the consent of the school's administration
in order to participate in the festivals. If any student has failed a course,
that student is barred from participating in the festivals by the "no pass, no
play" provision of the Texas Education Code (also known as "House Bill 72").
4. Petitioner retains on file an exemption certificate from every school
that participated in the festivals.
5. Petitioner also arranges for lodging for the schools as a reservations
agent. Petitioner reserves the rooms in the school's name, and forwards
payment to the hotel after the school has forwarded payment to Petitioner. If
the school has not forwarded the funds to Petitioner, Petitioner will not
advance the funds to pay for the lodging. Petitioner does not mark up the cost
of the rooms, but passes through the actual cost of the rooms on a
6. Petitioner also forwards to the hotel a room assignment list, which is
prepared by the school. The school determines which students are assigned to
which rooms; Petitioner simply forwards that information to the hotel. If a
school cancels its room reservations, then the school's deposit will be
refunded in accordance with the hotel cancellation policy. Petitioner does not
determine whether or not a school's deposit is refunded.
7. The primary purpose of the festivals is to provide an educational
function for the schools. The schools are critiqued and judged by prominent
music directors, generally university professors. The judges provide in-depth,
instructive criticism on audio tapes, and provide more general comments and
rankings on judging forms. Many schools utilize the festivals as a systematic
part of their music curriculum and participate on a regular, annual basis.
Some schools participate in more than one festival each year, to enhance the
educational benefits, and such benefits are widely recognized by music
CONCLUSIONS OF LAW
The Petitioner's contention should be sustained.
As the Petitioner states, and quotes, in its post-hearing submission, the
Petitioner's work is primarily educational. Aside from the entertainment also
provided to the schools' participants, the main business of the festival is
**************, Director of Bands, University of **************
The strength of bands can be summarized by stating that the level of bands in
the public schools has improved dramatically. This improvement is the direct
. . . Constantly expanded opportunities for performance exposure, including
athletic and community service, and contest and festival events.
While all four factors have contributed to better bands, the element of contest
and festival competition has brought about the recognition of outstanding
examples of not only technically proficient, but also stirring, musical
performances . . .
The Tax Division's theory is that the Petitioner is not an agent, but rather a
packager, selling some musical entertainment, some park rides, some souvenirs,
and also hotel accommodations.
The Findings of Fact demonstrate that this is not so. The only sales made
directly to students are the souvenirs, for which tax was collected and
remitted. As for hotel rooms, these accommodations were not bought in a block
by the Petitioner and then resold to the schools. The schools purchased the
hotel accommodations, using the Petitioner as their agent. Whether or not tax
should have been collected on the park rides/entertainment, is a matter for the
other hearing held contemporaneously with this one. (See Hearing #32,107 --
In any event, as the Findings of Fact show, the Petitioner was definitely an
agent for the schools, and I conclude that the hotel occupancy tax was
mistakenly assessed in this audit.
That the hotel occupancy tax be deleted from the audit.
Signed this 4th day of April, 1995.
Administrative Law Judge
ORDER OF THE COMPTROLLER
Hearing No. 32,105
The above decision of the Administrative Law Judge is approved and adopted in
all respects. This decision becomes final twenty (20) days from the date of
If a rehearing is desired, a Motion for Rehearing must be filed with the clerk
of the Administrative Law Judges within twenty (20) days from the date of this
Order, and must state the grounds upon which the motion is based.
RENDERED and ISSUED this 4th day of April, 1995.
Comptroller of Public Accounts
of the State of Texas
NOTE: Previous Accession Number 9604416H
ACCESSION NUMBER: 9504H1346F01
DOCUMENT TYPE: H
TAX TYPE: HOTEL