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Multistate Tax Update — May 30, 2013

A Texas Court of Appeals has determined that a hospitality company’s purchases of hotel consumables, such as soap, shampoo, conditioner, mouthwash, shower caps, pens, and notepads (the “hotel consumables”), that were placed in the hotel room for the use of its guests, were entitled to the sale-for-resale exemption for Texas sales and use tax (DTWC Corp. v. Combs, Texas Court of Appeals, Third District, Austin, No. 03-10-008-CV, April 11, 2013). This ruling reverses the Comptroller’s long-held position that such hotel consumables are not resold to guests, but are instead used by the taxpayer and subject to sales tax. Based on this case, taxpayers purchasing hotel consumables should consider whether it would be beneficial to file a refund claim if they previously paid sales tax on such purchases.