Sales Tax Audit for Texas Hotel Consumables
If you are the owner of a hotel, then chances are that you are providing hotel consumables such as:
- Soap
- Shampoo
- Conditioner
- Mouthwash
- Shower caps
- Pens
- Notepads
- Other similar non-reusable, consumable items
If you are undergoing a Texas sales and use tax audit, then you should know that the Texas Comptroller of Public Accounts (“Comptroller”) has long held the position that hotel consumables placed in rooms for use by hotel guests are subject to sales and use tax at the time of purchase.
Legal Precedent: DTWC Corp. v. Combs
However, in its opinion in DTWC Corp. v. Combs, No. 03-10-00801-CV (Tex. Ct. App. April 11, 2013), the court reasoned that hotel consumables are being sold by the hotel to its guests. Therefore, they qualify as non-taxable under the plain meaning of the sale for resale exemption codified in Section 151.302(a) of the Texas Tax Code.
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Frequently Asked Questions
Are hotel consumables subject to Texas sales and use tax?
Yes, under the Texas Comptroller’s interpretation, hotel consumables provided to guests, such as soap, shampoo, and notepads, are generally considered taxable at the time of purchase by the hotel.
What was decided in DTWC Corp. v. Combs?
The Texas Court of Appeals held that hotel consumables are sold to guests and thus qualify for the “sale for resale” exemption under Texas Tax Code Section 151.302(a), making them non-taxable.
Can hotels claim a resale exemption on consumables?
Yes, based on the DTWC Corp. v. Combs ruling, hotels can claim a resale exemption for consumables provided to guests, since the items are deemed resold as part of the room rental.
Does the Comptroller still audit hotel consumables?
Yes, the Texas Comptroller continues to audit hotels on the treatment of consumables. Hotels undergoing audits should be prepared to present documentation and arguments based on legal precedent.
Should I consult a tax attorney for my sales tax audit?
Absolutely. Navigating a Texas sales tax audit, especially involving resale exemptions, often requires legal insight. A tax attorney can help ensure compliance and assert valid exemptions.