Could hotels give resale certificates for trunk-line service used both for hotel business and resale to guests?

Plain-English summary

This General Counsel letter recounted a meeting about inconsistent telephone-company acceptance of resale certificates from hotels. It concluded that neither a telephone company nor a hotel could accept or give a resale certificate in good faith for trunk-line service used both for hotel business calls and for hotel guests.

Hotels and motels should give resale certificates only when they maintained separate business lines. If they used mixed lines instead, they should pay tax when buying the telephone service and then take a credit against their sales tax for the portion resold to guests.

Common questions

Could a hotel give a resale certificate for a mixed-use trunk line? No.

When could a hotel give a resale certificate? When it had separate business lines.

What if the hotel did not obtain separate lines? It paid tax on the service and took a credit for the portion resold.

Citations and references

The reproduced guidance cites no numbered statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8512L0683A01

Original ruling text

December 11, 1985

Dear ***:

This letter is intended to recount our meeting this morning in the
Comptroller's office.

he meeting was held to discuss the acceptance of resale certificates by
telephone companies. At present, some telephone companies are accepting
resale certificates while others are not.

COMPANY X's representative was present at the meeting. Her company has
refused to accept resale certificates. Its position is that it cannot
accept the resale certificates in good faith on trunk lines which are
used for a hotel's business as well as for use by the hotel's customers.

After the discussion, it became clear that neither a telephone company
nor a hotel could give a resale certificate in good faith for trunk line
service where the hotel must use the service for its business calls.

Therefore, in light of the information presented to us this morning, it
is my opinion that resale certificates should only be given where hotels
and motels have separate business lines.

I understand that many hotels and motels will not go to the added
expense of obtaining separate business lines. They should pay tax when
purchasing the telephone service and thereafter take credit against
their sales tax for that portion of the service which was resold.

We hope this will give both of your associations sufficient guidelines
on this question.

Sincerely,

General Counsel