The variety of lodging options available in Texas is as diverse as the Lone Star State itself, ranging from traditional hotels and motels to trendy treehouses and tiny houses. But no matter the differences in these accommodations, they all have one thing in common: they are all subject to Texas’ State Hotel Occupancy Tax .
In addition, cities and counties in Texas can levy a Local Hotel Occupancy Tax. Both taxes are commonly referred to as HOT.
The purpose of the local hotel occupancy tax is to promote tourism and the convention and hotel industry. Texas Tax Code Chapter 351 and Tax Code Chapter 352 give municipalities the authorization to levy a tax on a person who pays for the use of a hotel room, as defined by Tax Code Chapter 156.
Any business considered a hotel as defined in Tax Code Chapter 156 must charge HOT. This definition includes a hotel, motel, tourist home, tourist house, tourist court, lodging house, inn, rooming house, or bed and breakfast.
The Comptroller added Rule 3.161 to the Texas Administrative Code to cover short-term room rentals such as Airbnb and HomeAway. Rule 3.161 also clarified the definition of hotel accommodations listed in the Tax Code, to now include manufactured homes, skid mounted bunk houses, residency inns, condominiums, cabins and cottages.
Local HOT applies to rooms typically used for sleeping as well as lump sum packages. It does not apply to food sales, meeting spaces or banquet rooms.
When the bill to the customer is lump sum, the entire amount is subject to hotel tax. Some examples of lump sum packages are honeymoon packages at a hotel, hunting packages at a lodging house, staying at a meal-inclusive bed and breakfast, etc.
When the bill separately states the room charge from the other package items, the room charge is subject to hotel tax. The other separately listed package items may be subject to different taxes, such as sales or mixed beverage taxes.
Local HOT revenue may only be used to promote tourism and the convention and hotel industries. The following projects may be funded with local HOT revenue:
Refer to the Texas Municipal League's The Hotel Tax Two-Step (PDF) for details.
Cities and counties may also pledge local HOT revenue to pay for bonds used for eligible projects, as well as contract project management services to manage their HOT projects. Local HOT revenue may not be treated like general revenue or spent on general expenditures.
The Comptroller’s office encourages all jurisdictions to consult with their legal counsel before spending any local HOT revenue as several of these uses are heavily bracketed in the Tax Code, limiting their applicability to only certain communities.
The state HOT rate is 6 percent of the price paid for lodging.
A 2016 survey by the Comptroller’s office found that most cities may impose a rate up to 7 percent. Certain cities that fund a convention center may collect an additional 2 percent. Most counties may also charge up to 7 percent.
The combined rates of state, county, municipal and sports and community venue taxes cannot exceed 17 percent.
Cities may impose a local HOT by passing an ordinance.
A county may impose a local HOT by adopting an order or resolution; however, it must first be added into the law by the state legislature.
A sports and community venue (PDF) may impose a local HOT only with voter approval.
The laws regarding tax rates for cities and counties are heavily bracketed. Please consult legal counsel to ensure you are eligible to adopt a local HOT, as well as the rate that can be adopted by each city and county.
The Comptroller’s office administers the state portion of the hotel tax. Each local government determines its local hotel tax rate, based on the statutes listed above, and the tax collected is sent to the local government entity.
Federal employees, including military personnel, traveling on official business with a valid government ID card are exempt from both state and local hotel taxes. Foreign diplomats issued a hotel tax exemption card are exempt from state and local hotel taxes. Some designated Texas state employees — mostly judges, agency heads, members of state boards, commissions and the Texas legislature — are issued a special hotel tax exemption photo ID or card, making them exempt from all HOT. District attorneys, as well as district judges, are eligible to receive a card from the Comptroller’s office, making their stays at hotels in Texas exempt from the state and local taxes.
Texas governmental employees are not exempt from paying HOT, but their employer may request a refund from the Comptroller for the HOT.
HOT does not apply to permanent residents. By law, anyone who rents a room for 30 or more consecutive days is considered a permanent resident and is not required to pay the hotel tax. Comptroller Rule 3.161 defines a permanent resident as a person who has the right to use or occupy a room or space in a hotel for at least 30 consecutive days without interruption. A person is defined as an individual, organization or entity. Any interruption in the term of occupancy will void the exemption.
Guests who notify the hotel in writing of their intention to stay 30 or more consecutive days, and who actually stay for at least the next 30 consecutive days, will be exempt from the date of notification. Guests who do not notify the hotel must pay the tax for the first 30 days and thereafter will be exempt.
A hotel is liable for tax if a guest fails to stay for 30 consecutive days. In this case, a hotel may prefer to collect tax and then later give the guest a refund or credit.
Local HOT may be adopted to acquire, construct, improve and equip a venue project that is a convention center facility or related infrastructure.
For additional information, contact the Data Analysis and Transparency Division via email or at 844-519-5672, ext. 6-9231.