Texas Comptroller of Public Accounts    STAR System


200201878H  



HEARING NO. 40,676


RE:  **************
TAXPAYER NO.:  **************
AUDIT OFFICE:  **************
AUDIT PERIOD:  04/01/96 THROUGH 12/31/97

HOTEL OCCUPANCY TAX/RFD

BEFORE THE COMPTROLLER 
OF PUBLIC ACCOUNTS 
OF THE STATE OF TEXAS

JOE GRECO
Administrative Law Judge

E. LANCE FITZGERALD
Representing Administrative Hearings Section

**************
Representing Claimant


COMPTROLLER'S DECISION


PRELIMINARY DISCUSSION:

At the request of the Claimant, this case is being decided based upon the 
written submissions of the parties.

Unless otherwise indicated, Section references are to Title 2 of the Texas Tax 
Code, and Rule references are to sections of Title 34, Texas Administrative 
Code.  Notice has been taken of Comptroller's records pertinent to Claimant or 
the issues raised in this case.

CLAIMANT'S CONTENTION:

The Comptroller erred in partially denying Claimant's claim for a refund of 
hotel occupancy taxes reported and paid on attrition fees.

FINDINGS OF FACT:

1.  Claimant owns and operates a hotel in **************, Texas.

2.  By agreement, organizations reserve groups of rooms at Claimant's hotel for 
varying amounts of time.

3.  The agreement calls for the payment of attrition fees when an organization 
cancels or does not utilize 84% or less of the number of rooms originally 
reserved.

4.  The partial denial of Claimant's refund claim (i.e., Claimant's contention) 
pertains to attrition fees charged under contracts, which included the 
following "Attrition Schedule:"

ATTRITION SCHEDULE: 

( . . . ACCOUNT) acknowledges that it understands the rates quoted for guest 
room reservations are based upon utilization of the original numbers provided 
by ( . . . A CCOUNT) to the [Claimant] and noted in this agreement.

In the event guestroom utilization falls below this original number and 
negatively impacts anticipated revenues, the following attrition schedule will 
apply. ( . . . A CCOUNT) agrees to pay The [Claimant] fees noted below within 
thirty (30) days of departure. Attrition fees are arrived at by calculating a 
percentage of anticipated revenue, which was lost due to guestrooms originally 
reserved but not utilized.

Total Room Nights Used:  (85% or greater)  
Total Attrition Fee:  Waived

Total Room Nights Used:   84% or less)  
Total Attrition Fee:  (Room rate for each unused room) 

DISCUSSION AND CONCLUSIONS OF LAW:

Section 156.051(a) provides that hotel occupancy tax is imposed on a person who 
by contract or agreement ". . . pays for the use or possession or for the right 
to the use or possession of a room or space in a hotel . . ."

Claimant essentially argues that under the type of contract referred to in Fact 
No. 4, organizations or clients are only "obligated to pay for 85% of the 
rooms" reserved.

Claimant also argues that "[a]nother factor to consider is that the customer 
does not have the right to occupy the room by paying this attrition fee.  
Twenty one days before the contracted group is to come in, any unreserved rooms 
or non guaranteed rooms are reverted back to inventory for sale to public 
unless guaranteed."

The Administrative Hearings Section's (AHS) basis for opposing Claimant's 
contention is described as follows in AHS' Response of October 24, 2001:

Physical occupancy is not a necessary condition, per longstanding policy, to 
impose the Hotel Occupancy Tax.  Hotel Occupancy Tax is imposed whenever the 
full room rate is charged.  In Comptroller's Decision No. 24,654 (1989) the 
Petitioner, a hotel operator, and a customer entered into a contract containing 
a cancellation fee.  If the customer cancelled more than thirty days before 
scheduled arrival, the fee was less than the full room rate. Cancellation 
within thirty days of the scheduled arrival cost the customer the full room 
rate.  The Petitioner argued the cancellation fee was not subject to the Hotel 
Occupancy Tax because it constituted damages for breach of contract.  The 
Decision held the first instance was not subject to Hotel Occupancy Tax; but 
the second situation was.  The Decision concluded as to the second situation:

[T]he customer has paid the full consideration necessary to achieve a right of 
occupancy and the charge is taxable under TEX. TAX. CODE ANN. SECTION 
156.051(a).

Finally, the Decision directed "the audit be amended by deleting cancellation 
fees when the customer cancelled more than thirty days before the scheduled 
arrival and the fee was less than the contract price."

In the instant case, the auditor did not grant a refund of Hotel Occupancy Tax 
collected because of the attrition fee schedule shown above. The Claimant's 
Attrition Schedule specifically charges customers the "room rate for each 
unused room". The charge is taxable under the reasoning of Comptroller's 
Decision No. 24,654 (1989). The AHS rejects the Claimant's contention.

Section 111.102(a) provides that a credit or refund will be issued only if the 
Comptroller finds that the tax has been unlawfully or erroneously collected.  
Therefore, Claimant understandably bears the burden of proving its contention, 
by a preponderance of the evidence.  Decision Nos. 39,706 (2001) and 37,961 
(1999).

Based on a review of the evidence of record and the authority referenced above, 
I conclude that the AHS has the better case.  The contract language in question 
clearly states that the organization or client must pay Claimant the full 
"[r]oom rate for each unused room," and as pointed out by the AHS, under 
Decision No. 24,654 and Section 156.051(a) the charge/attrition fee is taxable. 
 (See Fact Nos. 3 and 4.)  Accordingly, Claimant has failed to meet its burden 
of proof.

RECOMMENDATION:

Claimant's contention should be denied.

SIGNED January 25, 2002.


JOE GRECO
Administrative Law Judge


HEARING NO. 40,676


ORDER OF THE COMPTROLLER


The above decision of the Administrative Law Judge is approved and adopted in 
all respects.  This decision becomes final twenty-three (23) days from the date 
of this Order.

If a rehearing is desired, a Motion for Rehearing must be filed with the 
Administrative Law Judge no later than twenty-three (23) days after the date of 
this Order, and must state the grounds upon which the motion is based.

RENDERED and ISSUED January 25, 2002.


CAROLE KEETON RYLANDER  
Comptroller of Public Accounts
of the State of Texas




ACCESSION NUMBER: 200201878H  
SUPERSEDED: N 
DOCUMENT TYPE: H  
DATE: 01/25/2002  
TAX TYPE: HOTEL