The Texas Court of Appeals for the Thirteenth District rejected a San Antonio hotel’s assertion that its purchases of guest consumables, such as soap and shampoo, are exempt from tax. The hotel was unable to prove that it purchased guest consumables for the purpose of reselling them to customers.
The hotel claimed that the rate customers pay for a room includes charges for hotel consumables like facial tissue, coffee, toilet paper, soap, shampoo, etc. found in the room and for any other consumables kept behind the front desk and provided to customers upon request. The hotel did not pay any sales tax on consumable items purchased from its distributor nor invoice or collect sales tax from its customers on consumables provided during the period of January 15 through September 2016.
The hotel filed a protest payment suit against the Texas Comptroller to seek a refund on the sales tax paid on the consumables, alleging that it was entitled to a sale for resale sales tax exemption.
However, the hotel does not itemize the costs of consumables provided to customers either as individual products or an overall cost on bills to customers. Customers pay a base price of $1.57 included in the rate for the room for all consumables, regardless of whether or not the customer uses any of the items. Further, the hotel advertises that “extras aren’t extra, the extras are free.” If the consumables i.e. “extras” are free for customers, it connotes that the purpose is not to sell the items to customers.
Due to this evidence, the Court determined that the hotel was not entitled to a sale for resale exemption. (Alamo National Building Management LP v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas et al., Texas Court of Appeals for the Thirteenth District)