- Agency
- Texas Comptroller of Public Accounts for the state tax, plus the city or county that levies a local hotel tax
- Paperwork
- Final occupancy tax reports, proof that taxes are paid, and a new registration by the buyer
- The clock
- Settle before closing, since reports are due even for months with no tax
Watch for: Treating the sale as the end of the tax account. Reports stay due until the accounts are closed or transferred.
Why it comes up in every hotel sale
Buyers and their lenders treat occupancy tax like payroll tax. An unpaid balance can follow the property, so they ask for clean records before they fund. Raising the issue first keeps the deal on schedule.
Two layers of tax
Texas charges a state hotel occupancy tax, and cities and some counties add their own. The state side runs through the Comptroller, while the local side is reported to the city or county that levies it.
That means a hotel near Arlington's stadiums can have at least two accounts to settle. Ask which local entities apply to your exact address.
Money you collect belongs to the taxing office
Occupancy tax is collected from guests on behalf of the government. It is not part of your revenue, and it does not belong to the buyer. Late or missing reports can bring penalties and interest.
Reports are generally expected for each filing period, even in months when no tax was collected. A sale does not pause that duty.
Proof the taxes are paid
Buyers and their lenders often want proof you are current. The Comptroller issues documents for this purpose, and local offices may issue their own, so ask each office what it provides and how long it takes.
Start the request early. Closing dates slip when an office is slow to respond, and a buyer may hold back part of the price until the paper arrives.
What the buyer must do
A new owner generally registers for its own account with the Comptroller and with the city. They do not simply inherit yours. Ask the Comptroller about the registration questionnaire for hotel occupancy tax and ask the city for its own form.
Plan the changeover date with the buyer so reports for each period land on the right owner.
In the purchase agreement
- State who files the final report for the closing month
- Say what proof of payment you will deliver and when
- Hold back a small amount if an audit could reach back
- Agree who answers a tax notice that arrives after closing
Where this fits
Occupancy tax is one of several items a hotel buyer checks. Our page on pricing a hotel or motel covers the rest, and owning the building covers the property side.
Your price starts with earnings, so ask for a free value check before you plan the paperwork.
This page is general information and not tax or legal advice. Confirm the rules and dates with your CPA, your attorney, the Comptroller and your city.