California Fee Transparency Compliance – Frequently Asked Questions
Q. Can I completely omit government taxes and fees from the final price?
A. No. While the statutes do not require inclusion of government taxes or fees in the advertised, offered, or displayed prices, hotels are required to disclose these fees/taxes at or before the consumer actually books a room or purchases a good.
Q. What types of fees are excluded from inclusion in the advertised price?
A. The statutes do not require businesses to disclose government fees and taxes, including transient occupancy taxes, California Tourism Marketing Act assessments, Tourism Improvement District Assessments and their equivalents, in the initial advertised price. As noted in the FAQ above, these must eventually be disclosed at or before the time of booking/purchase.
Q. iS YOUR RESTAURANT OR BANQUET SERVICE REQUIRED TO BE FACTORED INTO THE ITEM MENU PRICES?
A. Generally, yes. While service fees can still be present on menus, they must be factored into the advertised price. For example, if a restaurant has a a 6% service charge, the restaurant is required to include that 6% charge in the advertised, offered, and displayed price. This does not prevent the restaurant from including mention of the 6% increase, it only requires the restaurant to include it in the price. The State Attorney General has indicated his office will release FAQ guidance on this issue, among others, which may offer differing guidance.
Q. Do these measures require hotels to amend prices listed on room rate cards in hotel rooms?
A. Yes. Both measures apply to any advertised, offered, or displayed room rates. If a hotel lists room rates inside the room, those rates must be amended to reflect all mandatory fees, excluding government taxes and fees.
Q. Do these measures also apply to short term rentals?
A. Yes. These measures create a level playing field.
Q. Are these measures taxes?
A. No. While hotels will be required to expend funds to amend advertised prices and materials, the measures do not contain a tax or fee to be paid.
Q. Are hotels Liable for 3rd party sites?
A. No. While hotels must amend their own advertised price and should undertake efforts to amend how their rates are displayed on 3rd party sites, hotels are generally NOT liable for 3rd party sites which fail to conform with the statutes.
Q. If a restaurant has a mandatory gratuity, does that need to be included in the advertised price?
A. Yes. The statute states that any MANDATORY fees must be included in the advertised price. Example – For restaurants or hotels that add an 18% gratuity for groups of 6+ persons, the advertised prices must include the 18% gratuity.
Q. If a hotel has a $5 charge for room service, does that need to be included in the advertised price?
A. Yes. The statute states that any MANDATORY fees must be included in the advertised price.
Q. Hypothetical – a hotel has a group agreement which includes 100 rooms for one night and a $10,000 minimum F&B charge:
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Q1 – Hypothetical – Does the hotel need to bundle the F&B costs into the room night price displayed, even where the room rate and F&B costs are separate contracts?
A. It depends upon whether a court would view this situation as one or two separate items for the transaction – if the room rates are part of the same goods or services as the meeting space, then the meeting space must be included in the room rate price. Alternatively, if they are completely separate transactions, then they can be listed as separate line items and they do not need to be totaled together. However, if the F+B charges are required in order to access the discounted rate, then a court could view this as one transaction and require disclosure as part of the room rate. Since there is no caselaw, we cannot be sure how a court will interpret this situation.
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Q2 – Hypothetical – If the hotel requires the client to spend a minimum of $100 in F&B per room night booked, would the hotel be required to include the F&B costs within the room rate price?
A. Both bills apply to all mandatory fees, so this would need to be included in the displayed price.
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Q3 – Hypothetical – If the client requires event attendees to stay at the hotel, are they required to include the hotel room cost in their advertised price?
A. Yes, that is correct. A way to avoid this would be to make the hotel stay optional or recommended. However, as long as it is mandatory, it must be disclosed.
Q. Can a menu or catering option list an item cost as “market price?”
While the potential for litigation exists, this is likely legal under the statute. The term “Market Price” is not a price because it fluctuates from day to day and is the equivalent as saying “ask your server.” That said, whatever price is relayed to the customer would need to include any mandatory service charges added.
Q. Do the statutes apply to reservations/contracts signed before July one but occurring after July 1?
While the potential for litigation exists, this is likely legal under the statute. If the contract is closed by July 1, then the statutes do not apply. However, if there is a modification of the contract or the negotiations stretch through the July 1 date, then they are subject to the statutes (effective July 1).
Q. If a business adds a fee to credit card transactions, but permits a guest to avoid the charge by paying with cash or check – can the business continue to do so?
Since payment via card is optional, a surcharge is likely permitted. However, disclosure of the surcharge must comport with the law and hoteliers should take care to notify the guest of the difference early in the contracting or goods/services discussion. In practice, it would look something like the following –
- Select Payment Method:
ACH Check Card
$100 $100 $102.50
$100 subtotal
$2.50 Optional processing fee for credit cards
This is an information service of CHLA and does not purport to serve as legal or other professional advice – the counsel of competent legal professionals should always be sought.