HOTEL OCCUPANCY TAX 101
Hotel owners, operators or managers must collect state hotel occupancy tax from their guests who rent a room or space in a hotel costing $15 or more each day. The tax applies not only to hotels and motels, but also to bed and breakfasts, condominiums, apartments and houses that are used as Short Term Rentals (STRs). Local hotel taxes apply to sleeping rooms costing $2 or more each day.
Under the State of Texas Tax Code, every event, program, or facility funded with hotel occupancy tax revenues must be likely to do two things: 1) directly promote tourism; and 2) directly promote the convention and hotel industry. “Tourism” is defined under Texas law as guiding or managing individuals who are traveling to a different, city, county, state, or country.
The revenue derived from the hotel occupancy tax is used to promote tourism and the convention and hotel industry in San Antonio. The 16.75% hotel occupancy tax in San Antonio provides millions of dollars to support the convention and visitors’ bureau, local arts, history and preservation efforts, maintain and improve the convention center, and sports and entertainment facilities. Additionally, the hotel and occupancy tax has also enhanced the quality of life for the residence of San Antonio by financing improvements to local amateur sports and cultural arts facilities as well as the San Antonio River, which all promote tourism.
HOTEL OCCUPANCY TAX RATES
The state hotel occupancy tax rate is six percent (.06) of the cost of a room. The City of San Antonio tax rate is nine percent (.09). The City also collects 1.75% for Bexar County. The revenue must be reported to the State each month.
The six percent state hotel tax applies to any room or space in a hotel, including meeting and banquet rooms. Local hotel taxes, however, are due only on those rooms ordinarily used for sleeping. There are no state or local hotel taxes on meeting and banquet rooms located in a building where no sleeping accommodations are provided.
Most cities are eligible to adopt a hotel occupancy tax at a rate of up to 7 percent of the price paid for the use of a hotel room. If a city adopts the hotel occupancy tax within its ETJ, the combined state, county, and municipal hotel occupancy tax rate may not exceed 15 percent. Texas has among the highest combined hotel occupancy tax rates of any major metropolitan areas in the nation, with Houston at 17 percent and San Antonio at 16 ¾ percent.
Governed under Chapter 156 of the Texas Tax Code, the state hotel occupancy tax is administered by the Texas Comptroller. Funds from the state six percent hotel occupancy tax flow directly to the Texas Comptroller’s office and are largely used for the general governmental operations of the State. A portion of the state hotel occupancy tax revenue also goes toward funding tourism promotion through Texas’s ad campaign. Most Texans know this successful ad campaign by its famous tagline, “Texas, it’s like a whole other country.”
The government revenues itemized above add up to approximately $375 million. Since this estimate excludes some property, sales and hotel taxes paid by hospitality related businesses outside the San Antonio city limits, the full contribution of the industry to local government is in fact significantly greater than this estimate.
These revenues help reduce the taxes paid by those who live in the San Antonio metropolitan area. Without the tax payments from the hospitality industry, the city, county and state would either have to reduce services or find additional resources to balance their respective budgets.
USE OF LOCAL HOTEL OCCUPANCY TAX REVENUES
As mentioned previously, every event, program, or facility funded with hotel occupancy tax revenues, like the convention center, must meet two criteria 1) directly promote tourism; and 2) directly promote the convention and hotel industry.
A “direct” promotion of the convention and hotel industry has been consistently interpreted by the Texas Attorney General as a program, event, or facility likely to cause increased hotel or convention activity. This activity may result from hotel or convention guests that are already in town and choose to attend the hotel tax funded facility or arts or historical event, or it may result from individuals who come from another city or county to stay in an area lodging property at least in part to attend the hotel tax funded event or facility.
Criteria #1: First, every expenditure must directly enhance and promote tourism AND the convention and hotel industry.
Criteria #2: Every expenditure of the hotel occupancy tax must clearly fit into one of nine statutorily provided categories for expenditure of local hotel occupancy tax revenues:
- Funding the establishment, improvement, or maintenance of a convention center or visitor information center.
- Paying the administrative costs for facilitating convention registration.
- Paying for advertising, solicitations, and promotions that attract tourists and convention delegates to the city or its vicinity.
- Expenditures that promote the arts.
- Funding historical restoration or preservation programs.
- Funding certain expenses, including promotional expenses, directly related to a sporting event within counties with a population of under 1 million.
- Funding the enhancement or upgrading of existing sports facilities or sports fields for certain municipalities.
- Funding transportation systems for tourists
- Signage directing tourists to sights and attractions that are visited frequently by hotel guests in the municipality
VISITOR TAXES IMPROVE THE QUALITY OF LIFE FOR SAN ANTONIO RESIDENTS
The City of San Antonio’s 7% Hotel Occupancy Tax provided $61.6 million in FY15 to support various services that both visitors and San Antonio residents enjoy, including funds dedicated to maintaining and improving convention, sports and entertainment facilities, supporting the efforts of the Convention and Visitors Bureau, for cultural and arts programs, and for historic preservation.
In addition, the Bexar County Venue Tax and Car Rental Tax has supported the following community improvements:
- $125 Million San Antonio River Improvements
- $80 Million Amateur Sports Facilities
- $100 Million Community Arenas and Grounds
- $110 Million Cultural Arts / The Tobin Center