When a company sells vacation packages bundling hotel rooms, meals, amusement services, and incentive certificates, which components does it collect sales tax on, and which does it just pay tax on itself as the purchaser?

Plain-English summary

A company selling vacation/travel packages — which can bundle amusement services, hotel rooms, meals, and "Incentive Certificates" given to customers — asked how sales tax applies across all these pieces. The Comptroller broke it down component by component:

Amusement services in the package: the company must collect tax on any amusement services charge that's separately stated within the travel package (or where the surrounding additional costs are inconsequential), per Rule 3.298(d). But if the amusement charge is bundled into the overall package price (with airfare or lodging) and NOT separately identified, the company instead pays tax itself on the amusement services and charges the customer no additional tax.

Incentive Certificates: treated the same way as a travel club membership — the charge to the customer is not taxable, as long as the certificate doesn't itself function as an admission ticket or voucher to an amusement service. The company must pay or accrue tax on its own purchase price for the printed certificates (and similar printed materials) delivered to Texas customers.

Hotel rooms: the hotel collects hotel occupancy tax from the company (not sales tax).

Meals and admission tickets: the company pays sales tax to the restaurants and entertainment venues on its purchase price for meal coupons and admission tickets. No additional tax is due on the vacation package itself when resold to the customer.

Give-away items generally: the company must pay or accrue tax on its purchase price for any give-away items (like the printed certificates) — these can't be bought tax-free with a resale certificate, because they're being given away rather than resold to customers.

What this means for you

Travel agencies and vacation package sellers

Structure your package pricing carefully: separately stating an amusement services charge means you collect tax on it from the customer, while bundling it into the overall price flips the tax burden onto you as the purchaser (no customer-facing tax). Either way, budget to pay sales tax yourself on give-away items like incentive certificates, and to pay tax to restaurants/venues for meal coupons and admission tickets you include — none of that gets marked up with additional tax on resale to the customer.

Companies giving away incentive certificates or similar vouchers

Don't assume a resale certificate covers items you're giving away rather than reselling — you owe tax on your own purchase price for give-aways, full stop. But the certificate charge to your customer stays nontaxable (like a travel club membership), unless the certificate itself functions as an admission ticket/voucher to an amusement service.

Accountants and tax professionals

A useful multi-component breakdown of a bundled travel/vacation package: amusement-service bundling determines who pays tax on that piece (Rule 3.298(d)); hotel rooms are hotel-occupancy-tax territory, not sales tax; and give-away items (even nontaxable-to-the-customer incentive certificates) still generate an upstream sales tax obligation on the seller's own purchase price.

Common questions

Q: Do I collect tax from customers on amusement services included in a vacation package?
A: Only if the amusement charge is separately stated (or the surrounding costs are inconsequential). If it's bundled into the overall package price, you pay the tax yourself instead.

Q: Are Incentive Certificates given to customers taxable?
A: The charge to the customer isn't taxable (similar to a travel club membership), unless the certificate itself is really an admission ticket/voucher to an amusement service. But you owe tax on your own purchase price for the certificates.

Q: How does hotel tax work in a bundled package?
A: The hotel collects hotel occupancy tax from your company directly — that's separate from sales tax.

Q: Do I owe extra tax when I resell the whole vacation package to my customer?
A: No additional tax is due on the vacation package itself at resale, based on this letter's facts — the tax obligations are handled at each underlying component (amusement services, give-aways, meals/tickets purchased from vendors).

Q: Can I rely on this letter for my own travel package structure?
A: No. This opinion is based on the facts submitted, and other facts, though similar, may result in different answers.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.298(d) (amusement services — separately stated vs. bundled charges)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200004163L

Original ruling text

Date: April 3, 2000

From: Bettie Peterson

To: **

Subject: sales tax

Thank you for your recent email.

You are required to collect tax on charges for any amusement services sold with
a travel package, if those charges are separately stated (or if the surrounding
additional costs are inconsequential). If the charges for amusement services
are not separately identified from the price of an overall travel package
(i.e., with airfare or lodging), then you must pay tax on the amusement
services and would charge no tax to the customer. Rule 3.298(d).

Your company should pay tax to the suppliers of printed items such as the
Incentive Certificates and other such materials that you may give to your
customers.

The Incentive Certificate would be treated the same way as a travel club
membership. The charge to the customer is not taxable (assuming the Incentive
Certificate does not represent an admission ticket or voucher to an amusement
service). Your company is responsible for paying or accruing tax on your
purchase price of the printed certificates and other such printed items
delivered to Texas customers.

If the package you offer includes hotel rooms, the hotel will collect the hotel
occupancy taxes from you. You will also pay the sales tax to the restaurants
and the entertainment venues on the price paid for the meal coupons and the
admission tickets. Additional tax is not due on the vacation package when it is
sold to your customer.

Your company must also pay or accrue tax on its purchase price of any give-away
items. These items may not be purchased tax-free with a resale certificate,
because they are being given away, and not resold to customers.

Referenced rules are available
at.

The State Tax Automated Research system, which provides viewing and downloading
of rules, edited letter rulings, hearings, AG Opinions, etc., may be accessed
on the Internet at: http://www.window.state.tx.us/

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

If you have questions or need more information, I will be glad to help you. You
may call me toll free from anywhere in the United States at 1-800-531-5441,
extension 5-0330