What’s a ‘HOT tax?’ It’s complex

Rockdale residents have heard a lot about the motel-motel (HOT) tax in the past few years.

What exactly is the HOT tax. Here’s what the Texas Comptroller says about it.

When booking lodging in Texas, you’re often spoiled for choice, lots of beds at lots of different prices.

But however much you spend, you’re also contributing to the state and local governments by paying combined hotel occupancy taxes of anywhere from 6 to 17.5 percent, depending on where you stay.

The state’s HOT tax, as it’s often called, has been around since 1959, when the Texas Legislature enacted a 3 percent hotel occupancy tax.

Two rate hikes by lawmakers in the 1980s brought it to the present state rate of 6 percent.

In fiscal 2015, the state collected almost $526 million in state hotel occupancy taxes.

The state’s General Revenue Fund receives nearly 92 percent of this revenue, with the remainder allocated to a state Economic Development Account that supports the tourism advertising and marketing activities of the Texas Governor’s Economic Development and Tourism office.

LOCAL TAX—In the early 1970s, the Legislature authorized municipalities to collect the first local hotel occupancy taxes in Texas.

In 1981, the Legislature began permitting some counties to levy their own HOT taxes; legislation in the intervening years has increased the number of eligible counties to about 70.

Today, Texas cities and some counties may establish up to a 2 percent hotel occupancy tax to support a venue, if approved by public referendum.

RESTRICTIONS— Under Texas law, local HOT revenue can be used only to directly promote tourism and the convention/ hotel industry.

This means the proceeds should be spent on projects or events that result in visitors or attendees staying overnight in the community, generating more hotel occupancy tax.

The Texas Municipal League describes this as the first part of a two-part test it calls the hotel tax “two-step.”

Provided the first test of directly promoting tourism and hotel activity is met, the expenditure then must fit into one of the categories authorized by the HOT tax statute.

According to the Comptroller’s Data Analysis & Transparency Division, these categories include:

• The construction, maintenance and operation of a convention or visitor center.

• Facilities and personnel for the registration of convention delegates.

• Advertising and promotional programs to attract tourists.

• Encouragement and promotion of the arts.

• Historical restoration and preservation projects.

• Advertising to encourage tourists to visit historic sites and museums. signage directing the public to sights and attractions frequently visited by tourists.

• Certain transportation systems serving tourists and hotel guests.

• For certain cities, sporting events for which the majority of participants come from out of town.

• Qualifying sports facilities that routinely host regional or national tournaments; and coliseums or multi-use facilities.

COMMITTEE—In Rockdale, the city’s HOT tax is administered by the city council through the city’s appointed Tourism Committee.

The Tourism Committee vets requests for use of HOT funds, making sure such requests fit into the categories below, and makes a recommendation to the city council.

The council, though, has the authority to accept, reject or change the committee’s recommendation.

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