Texas Comptroller of Public Accounts    STAR System


201106069L




June 17, 2011

**************
**************
**************

Dear **************:

Thank you for your question concerning the hotel tax implications of a “State 
Cost – Recovery Fee.” You explained this is a fee when a company chooses to 
recover Texas franchise taxes by charging a recovery fee to its customers and 
that it was addressed in the August 2010 edition of Tax Policy News.

State hotel occupancy tax is due on the State Cost – Recovery Fee. Rule 
3.162(a)(2) provides that, “All charges for items or services, other than 
personal services or charges for use of a telephone, which are furnished in 
connection with the actual occupancy of the room are subject to hotel occupancy 
tax… These charges are includable in the tax base whether or not separately 
stated.”

The recovery fee is directly related to occupancy of the room and is not a 
charge for a personal service. State hotel occupancy tax is, therefore, due on 
the fee.

Local hotel occupancy tax is administered by the local taxing jurisdiction, so 
you will need to contact the City of ************** to determine how the city 
administers the fee.

You also asked how a fee would be taxed should it be added to a customer’s bill 
for alcoholic beverages at a bar. So that I may be able to answer your 
question, please provide additional details on how this transaction would be 
handled, such as with an example.

This opinion is based on the facts presented and current law. Other facts, 
though similar, may result in different answers.

If you have questions or need more information, please contact me.

Sign up for e-mail updates at the Comptroller topics of your choice at 
http://www.window.state.tx.us/subscribe.

Our goal is to provide you with prompt, professional service.  Please take a 
moment to complete our online survey at: 
http://aixtcp.cpa.state.tx.us/surveys/tpsurv2/index.html

Sincerely,


Donald S. Dillard
Oil & Gas, Fuels and Miscellaneous Taxes
Tax Policy Division
Texas Comptroller of Public Accounts
donald.dillard@cpa.state.tx.us




From: **************
Sent: Thursday, June 09, 2011 1:13 PM
To: Tax Help
Subject: Taxability of "State Cost - Recovery Fee"

To whom it may concern: 

I have a question concerning the tax implications of a "State Cost - Recovery 
Fee" when a company chooses to recover Texas Franchise Taxes by charging a 
recovery fee to its customers. 

As mentioned in the August 2010 edition of Tax Policy News, "ANY THE RECOVERY 
CHARGE IS PART OF THE TOTAL SALES PRICE OF A TAXABLE ITEM SOLD BY THE COMPANY. 
THEREFORE, IT IS SUBJECT TO SALES TAX IN THE SAME MANNER AS THE ITEM SOLD." 

How does this apply in the case of a hotel? The charge for the rental of a 
sleeping room is not subject to Sales Tax, but Hotel Occupancy Tax. Does this 
mean that a "State Cost - Recovery Fee" charged to a customer renting a hotel 
room is exempt from taxation, taxable at the Sales Tax rate, or taxable at the 
Hotel Occupancy Tax rate? Additionally, how would a fee be taxed should it be 
added to a customer's bill for alcoholic beverages at a bar? 

Thanks in advance for your reply, 


**************
**************




ACCESSION NUMBER: 201106069L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 06/17/2011
TAX TYPE: HOTEL