January 15, 2013

The Hotel Occupancy Tax (?HOT?) is a municipal tax charged to individuals who stay at Hotels within a city or it?s Extra-Territorial Jurisdiction. The HOT tax is levied by Cities pursuant to state statute. For most cities in Texas, this tax is capped at 7.0 % of the price paid for a room in a hotel. The price paid for a room does not include the cost of food served by the hotel and the cost of personal services performed by the hotel for the person except for those services related to cleaning and readying the room for use or possession.

Not all persons spending the night at a hotel are subject to paying the HOT tax. Some common exemptions are:

  • (i) a permanent resident of the city where the hotel is located;
  • (ii) certain members of charitable organizations;
  • (iii) state or government employees traveling as a part of their job duties.

HOT taxes collected by the Hotel are paid to the City. A city may use these HOT funds only as authorized by state statute. In Texas, HOT funds are to be used only to promote tourism and the convention and hotel industry in the city that authorized the HOT tax. HOT tax funds can only be spent:

  • (i) on statutorily authorized uses; and
  • (ii) shall be expended in a manner directly enhancing and promoting tourism and the convention and hotel industry.

Common authorized purposes for HOT funds are:

  • (i) to acquire sites for and/or construct, enlarge, and maintain convention centers and/or visitor information centers;
  • (ii) provide the facilities, personnel and materials to register convention delegates or registrants:
  • (iii) advertising and conduction solicitations and promotional programs to attract tourists and convention delegates and registrants:
  • (iv) general promotion and support of the arts, dance, drama, folks art, radio, etc that are related to the presentation, performance and exhibition of the art forms authorized;
  • (v) restoration and preservation and promotion of historic sites or museums that is near the convention center or located where frequented by tourists and convention delegates;
  • (vi) sporting events that will draw tourists.

In part II, tourism will be defined, a common test will be examined to determine if spending of HOT funds will directly enhance and promote tourism. The fiduciary duty in relation to managing these HOT funds will be examined in part III.

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