:
THE AITORNEY GENERAL
OF%-EXAS
AEHTIN. TEXAS 78711
January 14, 1970
Honorable Robert S. Calvert Opinion No. M- 553
Comptroller of Public Accounts
Capitol Building Re: Whether fraternal and
Austin, Texas veterans organizations,
operating clubs under
the Locker System or
the Pool System as those
terms are defined in Article
666-15(e), Vernon's Texas
Penal Code, but such clubs
not licensed as Private
Clubs, are required to
obtain Sales Tax Permits
and report and remit the
tax on the gross receipts
received for the furnish-
ing, serving or distribution
of alcoholic beverages, set-
ups, mix, food, soft drinks,
etc., to their members and
their guests; and, if so,
may they furnish resale
certificates at time of
the purchase of such
commodities in lieu of
Dear Mr. Calvert: paying sales tax thereon?
In your recent request for an opinion of this Office,
you state the following facts and ask the following questions:
"Prior to October 1, 1969 the Comptroller
of Public Accounts required social clubs,
fraternal and similar organizations operating
on a membership basis to report and remit the
sales and use tax upon the gross receipts for
the furnishing and distribution to its members
and guests of any tangible personal property,
including set-ups, mixes, ice, meals or other
food and drinks (other than alcoholic beverages
-2640-
3 .
( _
. _
Honorable Robert S. Calvert, Page 2 (M- 553)
exempt under former Article 20.04(B)(2) of
the Limited Sales, Excise and Use Tax Act).
"Effective October 1, 1969, Article 6 of
H.B. 4, 2d Called Session, 61st Legislature
amended Section 15e, Article 1 of the Texas
Liquor Control Act, as amended (Article 666-15(e),
Texas Penal Code) by adding thereto Subsection
6b. The new subsection exempts from the
Limited Sales, Excise and Use Tax Act the
preparation and/or serving of alcoholic
beverages to the members and guests of pri-
vate clubs licensed as such by the Liquor
Control Board. A special private club ser-
vice fee was imposed by the amendment in lieu
of the sales tax in the amount of five cents
for each serving of an alcoholic beverage by
a private club. H.B. 4 eliminated the general
exemption for alcoholic beverages from the
sales tax formerly contained in Article
20.04(B)(2).
"Sales Tax Ruling No. 95-0.53 was issued
effective October 1, 1969, to reflect the
provisions of subsection 6b as it pertains
to activities of licensed private clubs. It
is the interpretation of the Comptroller that
all other clubs and organizations which serve
or distribute alcoholic beverages, including
fraternal and veterans organizations, lodges
and similar organizations, are subject to
applicable provisions of the Limited Sales,
Excise and Use Tax Act pertaining to retailers
of tangible personal property. Consequently,
such organizations are required to collect and
remit the tax on the total charges or gratuities
collected for each drink, beverage, set-up, mix,
meal or other nonexempt food served, distributed
or otherwise furnished to members and guests. As
a retailer the organization is required to hold
a Sales Tax Permit and is entitled to issue resale
certificates in lieu of paying sales tax when
purchasing such items from package stores, beer
distributors, and other suppliers.
-2641-
. .
. .
Honorable Robert S. Calved, Page 3 (M- 553)
"Certain organizations have questioned the
foregoing interpretation and alleged that with
respect to beer and other alcoholic beverages
the only responsibility of the unlicensed
fraternal or veterans organization is to pay
tax on such items at the time of their purchase
thereof.
'Your official opinion is respectfully
requested whether the mentioned clubs and
organizations that are not licensed by the
Liquor Control Board as private clubs are
required to obtain Sales Tax Permits and report
and remit the tax on the gross receipts received
for the furnishing, serving or distribution of
any taxable items including drinks, food and
other nonexempt items mentioned above which are
furnished to such members and guests. In the
event your answer is in the affirmative, your
official opinion is requested whether such
organizations may furnish resale certificates
in lieu of paying sales tax at time of purchase
of alcoholic beverages and other items pur-
chased for the purpose of furnishing them to
members and guests."
Though you do not so state, we make the reasonable assump-
tion in the premises that the operations of the organizations
Inquired about are in conformity with one of the systems defined
In Section 1, Article 666-15(e), Vernon's Texas Penal Code, i.e.
a Locker System or Pool System.
The controlling question evolving from your request seems
to'be whether the exem tlon from the provisions of the Limited
Sales, Excise and uEiTkT ct added to Section 1 of Article
666-15(e), Vernon's Texas Penal Code by the 6lst Legislature in
1969, and numbered Subsection 6b, which became effective October
1, 1969, extends in favor of fraternal or veterans organizations
operating private clmccording to the definitions and terms
of said Sec. 1 of Art. 666-15(e), but not holding Private Club
Registration Permits prescribed by said Sec. 1 of Art. 666-15(e).
Subsection 6b of Sec. 1, Art. 666-15(e) appears as follows:
"6b. Neither the preparation and/or serving
of alcoholic beverages by a private club to its
-2642-
Honorable Robert S. Calvert, Page 4 (M-553)
members and guests, nor the collection of
gratuities
._ from members and guests shall be
considered as a sale for consideration and
shall be completely exempt from the provisions
of the Limited Sales, Excise and Use Tax Act,
as amended. In lieu of the tax imposed by the
Limited Sales, Excise and Use Tax Act, as
amended, there is hereby imposed a special
private club service fee in the amount of five
cents ($0.05) for each individual serving of
an alcoholic beverage by such club. Such fee
shall be Imposed at the time of the delivery
to the member or guest of the container con-
taining any of said beverages. The special
private club service fee shall be added to
the club's other charges for service of the
alcoholic beverage and shall be an obligation
of and collected from the person receiving
the service. The Board shall have power to
make such rules and regulations as are neces-
sary for the collection of this service fee."
This office has previously held that an act of the 57th
Legislature in 1961 exempting fraternal and veterans organiza-
tions from the application of Art. 666-15(e) as it then existed,
clearly and unambiguously relieved fraternal and veterans organi-
zations from the operation of such law and from any duty or
liability to qualify under same, and the clubs operated by such
organizations were thereby authorized to serve the members' liquor
to them and receive a service charge therefor under Article
666-15(e), through the use of the locker or pool system, without
obtaining a permit, such method not being deemed a sale within
the ambit of the statute. (Opinion No. c-693, May 26, 1966.)
The exemption of fraternal and veterans organizations was amended
but not materially changed by the 61st Legislature in 1969; such
amendment restricting the exemption to fraternal and veterans
organizations any pa& of whose property is exempt, or would be
exempt, from taxation under Article 7150, Revised Civil Statutes
of Texas, 1925, as then or later amended.
Thus, from this Opinion we find that the major thrust of
our prior holdings in this re ard is that the exempt organizations
so treated in said Article 66t -15(e) are not excluded but are
exempted from the Act; In other words, as a favored class they
are permitted to participate in the operations allowed under said
law without fee or permit; that any other ruling would necessarily
-2643-
3 ,
.*..“,y
.
.
Honorable Robert S. Calvert, Page 5 (M-553)
declare that the fraternal and veterans organizations were
entirely excluded from the rights and privileges afforded
by the said Article 666-15(e) and not entitled to operate
a private club, thereby rendering that portion of the law
unconstitutional because of being unreasonable and arbitrary
class legislation In violation of the "equal protection of
laws" provisions of both State and Federal Constitutions.
Sec. 3, Article I, Constitution of Texas; Fourteenth Amend-
ment to the Constitution of the United States; 12 Tex.Jur.2d
457, Constitutional Law, Sec. 110. Also see the other author-
ities cited in said Opinion No. c-693.
We find the principles of law stated in said Opinion
still valid and applicable to the questions now before us.
Fraternal and veterans organizations being permitted by law
to operate private clubs In the same manner as Permittees
under the terms of Art. 666-15(e), it then follows that such
organizations are entitled to all the benefits and
bestowed upon Permittees by such Article, including%%&%?
plete exemption therein contained from the provisions of the
Limited Sales, Excise and Use Tax Act insofar as the prepara-
tion and/or serving of alcoholic beverages by a private club
to its members and guests, and the collection of gratuities
therefor, is concerned. As to the non-exempt items mentioned
In your request, the preparation and/or serving of same by
such clubs operated by fraternal and veterans organizations
is subject to the provisions of the Limited Sales, Excise and
Use Tax Act, and as to such items the clubs are Retailers
under such Act and required to obtain sales tax permits and
remit the tax on the total charges or gratuities received
therefor.
In reference to the question posed by the last sentence
of your request, in view of our foregoing ruling that the
alcoholic beverages in question can be served or dispensed by
any of such clubs only under the terms and methods prescribed
by said Art. 666-15(e), it is apparent that the final sale
of the liquor In question for which any sales tax would accrue
would occur at the time of its purchase from the dealer. In
this connection it is pointed out that subsection 6b of Sec. 1,
of said Art. 666-15(e) expressly prohibits from consideration
as a sale, the preparation and/or serving of alcoholic beverages
by su=lubs to their members and guests, and the collection
of gratuities therefor. Furthermore, this office has hereto-
fore held in said Opinion No. c-693 that the use of the "Locker
-2644-
,
.
Honorable Robert S. Calvert, Page 6 (M-553)
System" or 'Pool System" as provided for in Art. 666-15(e),
Vernon's Penal Code, does not constitute a sale. Therefore,
our answer to that part of such question pemning to the
alcoholic beverages purchased for such purposes is that no
resale certificates are authorized. In reference to the non-
exempt items also Inquired about, our answer is that the laws
authorizing retail certificates in lieu of the tax upon the
purchase of non-exempt items for resale are available to such
clubs as they are to any Retailer under the Limited Sales,
Excise and Use Tax Act.
SUMMARY
r'raternaland veterans organizations
operating Private Clubs in accordance with
the definitions and terms of Sec. 1 of
Art. 666-15(e), Vernon's Texas Penal Code,
but not holding Private Club Registration
Permits prescribed by said Article, are
within the exemption from the provisions
of the Limited Sales, Excise and Use Tax
Act as to the preparation and/or serving
of alcoholic beverages to their members or
their guests, and the collection of gra-
tuities for services. As to set-ups, mix,
food, soft drinks and other non-exempt
ccmmodities so served, such organizations
are amenable to said Limited Sales, Excise
and Use Tax Act and obligated to comply
therewith. No resale certificates in lieu
of sales tax are authorized on behalf of
purchaser of the liquor in question from
the dealer. Resale certificates are
authorized for the purchase of the non-
exempt items so served.
General of Texas
Prepared by R. L. Lattimore
Assistant Attorney General
-2645-
. . -
*
Honorable Robert S. CalVert, Page 7 (M-553)
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
Alfred Walker, Co-Chairman
Gordon Cass
Jay Floyd
Jack,Sparks
Roland Allen
MADE F. GRIFFIN
Staff Legal Assistant
NOLA WRITE
First Assistant
-2646-