What is HOT?
In Texas, Hotel Occupancy Tax (HOT) is collected at the state level and by various counties and municipalities.
This Toolkit refers to municipal HOT, which is collected and administered locally. Municipal HOT funds are currently the largest source of public funding for the arts in Texas.
While this toolkit won’t be going into further detail about either county or state HOT, we’ve provided a short summary of both below for your information. You can visit our Resources section to read more about county and state HOT, including the applicable section of the Texas Tax Code.
Municipal
For direct funding of the arts, we look to the municipal HOT.
What is municipal HOT? In Texas today, municipalities are authorized to charge a tax of up to 7% on individuals staying overnight in hotels or other accommodations. The taxes collected are submitted quarterly to the municipality and must be used for one of nine allowable uses, one of which is promotion of the arts, arts facilities, and arts programming that also has some direct impact on “tourism and the convention and hotel industry.” In most Texas municipalities, up to 15% of the hotel occupancy tax that is collected may be used to fund eligible arts-related expenditures. Understanding how this all works—whether you represent the arts, a municipality, or a hotel—is the key to ensuring it works to the benefit of all parties. And often the best way to understand something is to dive right in and start exploring. For that, we turn to the HOT Toolkit.
County
About 60 Texas counties that meet specific eligibility requirements are permitted by the Legislature to levy their own county Hotel Occupancy Tax. In the authorizing legislation for some of these counties, there is authorization for the involved county to distribute a portion of those funds to the arts. More information, including eligibility requirements, guidelines, and uses of the tax can be found on the Resources page.
State
The state Hotel Occupancy Tax rate is currently 6% and applies not only to traditional hotels, but also to motels, B&Bs, Airbnbs, HomeAways, and other short-term rentals. Where does that 6% tax go? The state’s General Revenue Fund receives close to 92% of the state-levied hotel tax revenue, with the remainder allocated, in part, to a state account to support tourism with advertising, marketing, and other promotional efforts. The state HOT does not directly go to supporting the arts (which is why we won’t be focusing on it in this Toolkit), but a healthy tourism industry certainly brings added local hotel tax dollars that are available in part to artists and arts organizations. More information can be found in the Texas Tax Code Chapter 156.