Did a Texas hotel owe tax when it gave guests complimentary coffee, champagne, candy, or flowers?

Plain-English summary

A resort and hotel operator asked about complimentary food, beverages, and flowers supplied to guests.

The Comptroller said unprepared coffee was nontaxable by nature, so the hotel owed no use tax when it gave the coffee to guests free of charge. Taxable amenities such as champagne or candy were different: the hotel owed tax based on its original cost.

Flowers supplied with meals or in hotel suites were not treated as resold unless the guest's invoice separately stated a charge for them. With a separate flower charge, the guest owed the tax; without one, the hotel owed tax on its original flower cost.

What this means for you

Calling an amenity complimentary did not create one uniform result. The item's inherent taxability and whether it was separately billed determined whether tax fell on the hotel or guest.

Common questions

Did the hotel owe use tax on free unprepared coffee? No.

What about free champagne or candy? The hotel owed tax on its original cost.

Were flowers treated as resold to the guest? Only when separately billed on the guest's invoice.

Who paid tax on unbilled flowers? The hotel, based on its original cost.

Citations and references

• 34 Tex. Admin. Code Rule 3.293(e)(3) — complimentary meals and beverages provision quoted in the letter

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1133A11

Original ruling text

May 9, 1991

Dear ***:

Thank your for your letter regarding the taxability of certain
complimentary items your resorts/hotels provide its guests.

You first asked about complimentary food and beverages, referring to
amenities in the hotel rooms and free coffee in the lobby. You referred
to Sec.(e)(3) of Rule 3.293, Food; Food Products; Meals; Food Service:
"Meals and beverages furnished to customers free of charge as promotional
items are taxable to a restaurant owner only to the extent tax would have
been due on the original purchase price of the food or drinks from
suppliers". For any items that are non-taxable by nature (i.e., coffee
which is purchased in the unprepared stage), your company would not owe
use tax when providing it free of charge to its guests. However, other
possible amenities that are taxable by nature (i.e., champagne or candy)
given free of charge to guests would require your company to pay tax
based on its original cost.

You also stated that your company provides flowers both with every meal
and also in all hotel suites. This would not be considered a resale
unless a billing for the flowers was separately stated on the invoice to
the guest, in which case your guest would owe tax on the flowers. If your
company does not separately state a billing for the flowers, then your
company owes tax based on its original cost of the flowers. Tax will be
due either from your company or the guest.

This opinion is based on the facts provided. If there are additional
or different facts, the opinion may change.

If you have any questions, please don't hesitate to call toll free at
1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division