FAQs

What is HOT?

A: For the purposes of this toolkit, when we say HOT we’re referring to the municipal Hotel Occupancy Tax: LINK.

Is there a difference between state, county, and municipal HOT and how the funds are administered?

A: Yes, there is a difference. For the purposes of this toolkit, we’re focusing on the municipal HOT, but you can find details about both the state HOT and county HOT in the resource section: LINK.

What is the definition of a ‘municipality’?

A: ‘Municipality’ includes any incorporated city, town, or village.

How much HOT revenue is collected in my municipality annually?

A: Municipalities that impose a local HOT must now annually report their tax rates and revenue amounts, including the percentage of revenue allocated for specific uses - including the arts - from the preceding fiscal year. You can find this data on the State of Texas’ Comptroller site. Note, the data is self-reported by submitting municipalities or third parties on their behalf and has not been independently verified by the Texas Comptroller of Public Accounts. If you don’t see your municipality on this list or if you have specific questions about your municipality’s local HOT rate, revenue, and/or allocations, contact your municipality directly or reach out to Texans for the Arts for assistance.

How does my municipality distribute HOT?

A: Tool # 3 in the HOT TOOLKIT: Arts Organizations & Artists will help you answer this question: LINK.

What arts projects can HOT fund (or not fund)?

A: Tool # 2 in the HOT TOOLKIT: Arts Organizations & Artists will help you answer this question: LINK.

What does the expression “heads in beds” mean and are arts organizations who receive HOT mandated to meet a certain overnight stay threshold?

A: “Heads in beds” is commonly used in the hotel industry when discussing occupancy statistics. This refers to the idea of measuring the impact on a hotel based on the number of overnight stays in a local hotel, B&B, etc. (literally, how many heads in how many beds).

While we know that HOT expenditures for the arts must promote and have a direct impact on tourism and the hotel and convention industry, there is a common misconception that HOT funding for the arts must result in a direct measurable impact on hotel occupancy.

It is important to know that there is no requirement mandated by Chapter 351 of the Texas Tax Code to prove “heads in beds” to qualify for HOT funding.  However, each municipality does have the discretion to impose their own requirements and it’s possible that local HOT funding could be tied in some way to this concept of measuring impact by counting overnight stays.

This is a good time to review the Memorandum of Understanding between Texas Hotel & Lodging Association and Texans for the Arts – LINK –to see a number of ways that hotels and arts leaders can work together to promote the arts AND the hotel industry and have a direct impact on growing tourism.

Remember that the arts not only enrich our communities, but also boost the local economy and that limiting the conversation to “heads in beds” narrows the scope of ideas showing a direct impact on the hotel industry for all stakeholders. 

What is the HOT tax rate and who pays the tax?

A: The HOT tax rate varies from municipality to municipality and cannot exceed 7%, without legislative action. It is paid by the hotel customer.

Do AirBnBs, HomeAway, Short Term Rentals (STRs), Bed & Breakfasts, and other overnight accommodations have to collect state and municipal HOT?

A: Yes. Chapter 351 of the Texas Tax Code was passed before the popularization of short term rentals (STRs).  Subsequently, in the STATE Tax Code Sec. 156.001, the state expanded the definition of a “hotel” to include short term rentals such as Airbnb and HomeAway:“For purposes of the imposition of a hotel occupancy tax under this chapter, Chapter 351 or 352, or other law, "hotel" includes a short-term rental. In this subsection, "short-term rental" means the rental of all or part of a residential property to a person who is not a permanent resident under Section 156.101.”The initial definition of a “hotel” continues as follows:“Sec. 156.001. DEFINITIONS. (a) In this chapter, "hotel" means a building in which members of the public obtain sleeping accommodations for consideration. The term includes a hotel, motel, tourist home, tourist house, tourist court, lodging house, inn, rooming house, or bed and breakfast.”

Our community currently maximizes the full allowable 7% HOT rate. Can we levy a higher HOT rate?

A: It is possible for communities to levy a municipal HOT greater than the allowable 7%. This can only happen if your community leadership drafts a “local bill” which gets adopted by the Texas State Legislature that permits the community to increase the municipal HOT. As an example, the City of Austin has a 9% municipal HOT.

How much of the tax collected can be used for the arts?

A: As long as the expenditures are in one of the nine allowable uses, up to 15% of the municipal HOT may be used to fund the arts.

What are the nine allowable uses?

A: Those nine allowable uses are: 1) convention centers, 2) materials for convention registration and delegates, 3) advertising and promotion to attract tourists and conventioneers, 4) (promotion of) the arts, 5) historical preservation and restoration, 6-8) these pertain to sports facilities and multi-use facilities, and 9) signage to attract tourists.

Our community currently maximizes the full allowable 15% for the arts. Can we use more than 15%?

A: It is possible for communities to allocate more than 15% of HOT funds to the arts. This can only happen if your community leadership drafts a “local bill” which gets adopted by the Texas State Legislature that permits the community to increase municipal HOT funding of the arts. As an example, the City of Houston allocates 19.5% for the arts.

Are there other public resources, besides the HOT funds, available to support the arts?

A: Yes. On the local level, these will vary from municipality to municipality so we’d suggest reaching out to your local leaders to learn more. On the state level, the Texas Commission on the Arts (TCA) is the state of Texas’ arts agency. To learn more about TCA in general, and funding opportunities specifically, visit www.arts.texas.gov. At the national level, the National Endowment for the Arts has funding opportunities and you can read more about them at www.arts.gov.

I want to learn more about how HOT is used in our municipality, but our municipal staff says I must submit a Public Information Request (PIR) for more information. How do I submit a PIR?

A: Tool # 1 in the HOT TOOLKIT: Arts Organizations & Artists will help you answer this question: LINK.

Our community currently dedicates all of its municipal HOT to fund a convention center or municipal/civic building used for conventions and large meetings. Do we have any hope of securing HOT resources before the debt is paid?

A: The funding, building and maintenance of convention centers/convention hotels is costly and often, the primary recipient of HOT in a given community, especially in larger communities. Frequently, those funds can be tied up for 20-30 years depending upon the size of the debt incurred and legal commitments made in the development of the convention facilities.  However, there have been communities that have paid off some debt early, freeing up some HOT funds for other uses including the arts. It is worth exploring with your municipal finance department what the status of HOT funds tied up in convention center construction/maintenance is and if there is the possibility of negotiating or servicing debt to make funds available for other community uses that promote the very things that conventioneers would like to partake in – the arts.

My municipal leadership says that to receive HOT funds any contracts we (an arts organization) make with other entities to realize our funded project must meet municipal hiring criteria. Is that true?

A: There is nothing in Chapter 351 of the Texas Tax Code that sets forth hiring criteria for artists and/or arts organizations in any community.  In fact, it’s to be expected that individuals and organizations contracted to provide artistic events/cultural performances with the use of HOT dollars will have a skill base unique to their art form that is unlikely to comply with and/or relate to municipal hiring criteria. A municipality mandating an arts project/cultural event funded by HOT comply with municipal hiring criteria would very likely cripple the proposed arts/cultural event.

Can HOT funds be used to fund a performing arts center or arts related facility?

A: The short answer is “no,” at least not with funds designated as part of Chapter 351.101(a)(4) or the promotion “of the arts.” In 2017 in Opinion KP-0131, the Texas Attorney General took a strict position on using local hotel tax revenue for an arts facility. The opinion states that the phrase "promotion of the arts," in the state statute does not expressly authorize the use of municipal hotel tax revenues for the construction of arts facilities. The opinion concluded, "construction costs of theater facilities, considered alone, are not within the scope" of the arts category of hotel occupancy tax expenditures. Based on this reasoning, it seems that the Texas Attorney General holds that funding of a physical structure with local hotel tax revenue must be specifically authorized under some other statutory category of hotel tax expenditures, aside from the general “promotion of the arts” category*—such as Chapter 351.101(a)(1) or the construction of convention centers.

How can arts organizations receiving HOT funds and hotels hoping to increase overnight stays work together? 

A: Partnerships between arts organizations and hotels are  beneficial to both parties. The Memorandum of Understanding between Texans for the Arts and the Texas Hotel & Lodging Association is a great resource for ways the arts and the hotel industry can support each other. LINK (in text)

Hey, my question isn’t answered here, where can I go for more information?

A: Great question! For additional guidance and insights, contact Texans for the Arts Foundation at info@texansforthearts.com. We’ll be adding questions and answers to this page as we receive them.