h




                             August 3, 1989




    Honorable Ralph R. Wallace, III        Opinion No.   JM-1080
    Chairman
    Cultural and Historical Resources      Re: Whether federal em-
       Committee                           ployees are subject to
    Texas House of Representatives         the local     hotel/motel
    P. 0. Box 2910                         occupancy tax   (RQ-1740)
    Austin, Texas   78769

    Dear Representative   Wallace:

         YOU ask whether     federal employees   travelling    on
    official business are exempt from the local hotel occupancy
    tax. Chapters 351 and 352 of the Tax Code authorize    cities
    and certain counties to impose a local hotel occupancy tax

            on a person who, under a lease, concession,
            permit, right of access, license, contract,
            or agreement, pays for the use or possession
            or for the right to the use or possession of
            a room that is in a hotel, costs $2 or more
            each day, and is ordinarily used for sleep-
            ing.

    Tax Code 55 351.002(a), 352.002(a).

         Attorney General Opinion WW-738 (1959) concluded      in
    response to a similar question that officers and employees
    of the federal reserve bank while travelling on official
    business are subject to the state hotel occupancy tax now
    provided for in chapter  156 of the Tax Code. The opinion
    reasoned that under either of the two methods      by which
    federal employees are reimbursed  for their travel expenses
    -- per diem or actual expenses -- an employee    contracting
    for a hotel room would do so in his private capacity and it
    would be upon the employee and not his employer, the federal
    reserve bank, that the hotel tax would be imposed.         In
    contrast, the opinion noted, if the federal reserve bank
    had contracted directly with the hotel,   imposition of the
    tax would violate the prohibition -- based on the Supremacy
    Clause of the United States Constitution,       article VI,
    section 2 -- on a state's taxation of the federal government




                                     p. 5643
Honorable Ralph R. Wallace, III - Page 2   (JM-1080)




or its instrumental .ities. See, e.cf., Kern-Limerick, Inc. v.
Shurlock, 347 U.S. 110 (1954); Alabama v. Kina and Boozer,
314 U.S. 1 (1941) i McCulloch v. Maryland,        17 U.S. 316
(1819).

     A 1976 decision     of the United    States comptroller
general accords with the reasoning and result of Attorney
General Opinion WW-738.    55 Comp. Gen. 1278, 1279    (1976).
That ruling concluded   that employees of the United    States
Department of the Interior,   Bureau of Indian Affairs,   were
not exempt from a local hotel tax in Anchorage, Alaska.

        Ordinarily, a Federal employee on official
        duty rents a hotel or motel room directly
        from the proprietor.   The Government is in no
        sense a party to this arrangement with the
        establishment.   In the absence of a specific
        State or local statute exempting room rentals
        to Federal employees    from this tax, that
        employee is liable to pay it.         That the
        government, via statute and regulations,    may
        be obligated   to reimburse that person     for          I   -.

        expenses   incurred while away on official
        business does not affect that individual's
        liability for this tax. In this regard it is
        clear that the legal incidence of the tax is
        on the employee, and not on the Government,
        and that when the Government pays a per diem
        or actual expenses allowance,       it is not
        paying the tax but reimbursing the employee
        for the employee's total expenses.    That  is,
        by statute and regulation the Government    has
        agreed, in effect, to accept the economic
        burden of a tax imposed not on it but on its
        employees.   We therefore conclude that under
        such circumstances, Government employees    may
        not assert the Government's    exemption   from
        the payment of State and local taxes levied
        upon motel and hotel rooms.

     Accordingly,   we conclude that a federal      employee
travelling on official business whose travel expenses    are
reimbursable by his employer, either on a per diem or actual
expenses basis,  is not exempt from a local hotel occupancy
tax imposed under chapters 351 or 352 OP the Tax Code when
he rents hotel accommodations.




                               p. 5644
Honorable Ralph R. Wallace, III - Page 3    (JM-1080)




                       SUMMARY

           A federal employee travelling on official
        business whose travel expenses are reimburs-
        able by his employer, either on a per diem or
        actual expenses basis, is not exempt from a
        local hotel occupancy     tax imposed   under
        chapters 351 or 352 of the Tax Code when he
        rents hotel accommodations.

                                   J/by~
                                              MATTOX
                                      Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General




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