AGENDA CAPTION:
Title
Hold a public hearing regarding and consider approval of Ordinance 2026-26 amending Sections 34.805 and 78.103 of the San Marcos City Code and the city’s fee schedule to establish payment processing fees for electronic payment of short term rental permit fees and hotel occupancy taxes; providing for the repeal of any conflicting provisions; providing a savings clause; and declaring an effective date; and consider approval of Ordinance 2026-26 on the first of two readings.
Body
Meeting date: July 7, 2026
Department: Finance
Amount & Source of Funding
Funds Required: N/A
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Fiscal Note:
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Background Information:
The City is currently under contract with Azavar LocalGov to implement the HOT reporting platform, which will streamline reconciliation of hotel occupancy tax reporting and receipts. All payments made through this platform are processed by a merchant service provider, a third-party payment processor. There are fees to process electronic payment transactions.
Historically, the City has absorbed payment processing fees associated with HOT payments, approximately $40,000 annually. Under Texas Local Government Code Sections 132.001-132.003, municipalities are authorized to charge a service fee for accepting electronic payments, including credit card transactions.
The merchant processor will collect the following fees for Hotel Occupancy Tax payments:
• 3.0% for credit card transactions
• $2.00 per electronic payments transaction
This proposed ordinance would allow the applicable payment processing fees to be paid by the hotel taxpayer directly to the third-party payment processor. Implementing this change is expected to save the City approximately $40,000 per year.
Council Committee, Board/Commission Action:
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Alternatives:
City continues to absorb payment processing fees at approximately $40,000 per year.
Recommendation:
Approve proposed ordinance to pass on the payment processing fees to the taxpayer of the Hotel Occupancy Tax.