9504H1346F01



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

BEN SARRETT
Administrative Law Judge

ERNEST FORTENBERRY
Representing Tax Division

**************
Representing Petitioner


COMPTROLLER'S DECISION

PRELIMINARY COMMENTS

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 ************** 
and**************.

PETITIONER'S CONTENTION

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 
educational activities.]

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 
dollar-for-dollar basis.

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 
educators.  

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 
concentrated work:

**************, 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 
result of:

. . . 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 -- 
sales tax.)

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.

RECOMMENDATION

That the hotel occupancy tax be deleted from the audit.

Signed this 4th day of April, 1995.


BEN SARRETT
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 
this Order.

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.


JOHN SHARP
Comptroller of Public Accounts
of the State of Texas


NOTE: Previous Accession Number 9604416H




ACCESSION NUMBER: 9504H1346F01
SUPERSEDED: N
DOCUMENT TYPE: H
DATE: 04/04/1996
TAX TYPE: HOTEL