Not to the hotel. Scott Smith of Baker, Donelson, Bearman, Caldwell & Berkowithz, PC reports that in an April 11, 2013 decision a Texas Court of Appeals ruled that:
Red Lion charged a hotel guest asset fee for overnight lodging, which was subject to state and local hotel occupancy taxes. In addition to the use of a hotel room and access to hotel facilities, such as a swimming pool and exercise facility, guests were free to use the hotel consumable as they saw fit….Red Lion’s purchases of the hotel consumables from its suppliers qualified for the Texas resale exemption from Texas state and local taxes. According to the court, the consumables were tangible personal property purchased by Red Lion, placed in a hotel room for use by its guest in the same form or condition in which the consumables had been purchased by Red Lion, and the hotel guests paid a fee (i.e., consideration) to use a room and its amenities, including hotel consumables. As a result, the Court of Appeals held that the hotel consumables qualified for the resale exemption when Red Lion purchased them from suppliers”
Hotel consumables include, but are not limited to, soaps, shampoos/conditioners, mouthwash, shower caps, sewing kits, pens, notepads, etc.
This is great news for hotel owners/operators. Hotel owners/operators in Texas should inquire with their tax professionals to see if they can take advantage of this exemption. This ruling could also carry over into other states and/or similar types of exemptions. Conversely, the decision is bad news for states, who are already struggling to keep up their revenue base.