Did a motel charge Texas sales tax on guests' long-distance calls and its 50% service charge, and could the Comptroller decide whether the markup was legal?

Plain-English summary

Article 4596b required a hotel or motel to post in each room a conspicuous card or sign stating that room's daily price and the date the rate card was posted.

The Comptroller could not decide whether a 50% service charge added to guests' long-distance calls was legally permissible. The letter directed that consumer-law question to the Attorney General's Consumer Protection Division.

For sales tax, both the underlying long-distance call charge and the 50% service charge were taxable. The motel met Rule 3.344(a)(7)'s definition of a telephone company, and long-distance telecommunications were taxable when the conditions in Rule 3.344(b)(4) were satisfied.

Common questions

Was the long-distance charge taxable? Yes, when Rule 3.344(b)(4)'s conditions applied.

Was the hotel's 50% service charge taxable? Yes.

Did the Comptroller decide whether a 50% markup was lawful? No.

Citations and references

• Vernon's Revised Civil Statutes art. 4596b
• 34 Tex. Admin. Code Rule 3.344(a)(2), (a)(7), and (b)(4)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8910L0969C02

Original ruling text

October 6, 1989

Dear *:

Thank you for your letter of September 27, 1989, concerning the
requirement that rates be posted in each motel room and whether or
not a 50% service charge on long-distance phone calls is legal.

Room rates are required to be posted in each room under Article
4596b of Vernon Revised Civil Statutes. This provision requires
the owner or keeper of a hotel to post in a conspicuous place in
each room a card or sign, stating the price per day of each room
and bearing the date the rate card was posted.

The legality of the 50% service charge on long-distance phone
calls cannot be determined by our office. This question should
be addressed to the Attorney General's Consumer Protection Divi-
sion.

I can tell you that the long-distance phone call charge and the
50% service charge are subject to sales tax. The hotel meets the
definition of a "telephone company" as defined in paragraph (a)(7)
of the enclosed rule 3.344 - Telecommunications Services. The
charge for "long-distance telecommunications" as defined in para-
graph (a)(2) is taxable if the conditions set out in paragraph (b)
(4) of the rule are met.

This opinion is based on the facts presented. If there are addi-
tional or different facts, the opinion may change.

If you have any questions or need more information, you may call
toll-free 1-800-252-5555, ext. 3-4683. The regular number is 512/
463-4600. You may write me at Tax Correspondence, Comptroller of
Public Accounts.

Sincerely,

Eddie C. Washington
Tax Correspondence