: 

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 furnishing, serving or distribution 

of alcoholic beverages, setups, 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 

you state 

your recent request for an opinion of this Office, 

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- 
( _ 

Honorable Robert S. Calvert, Page 2 (M- 553) 

3 . 

. _ 

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 private clubs licensed as such by the Liquor 

Control Board. A special private club service 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 purchased for the purpose of furnishing them to 

members and guests." 

Though you do not so state, we make the reasonable assumption 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 

gratuities from members . _ 

the collection of 

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 containing 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 necessary 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 organizations from the application of Art. 666-15(e) as it then existed, 

clearly and unambiguously relieved fraternal and veterans organizations 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 St atutes 

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 66 t -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 Amendment to the Constitution of the United States; 12 Tex.Jur.2d 

457, Constitutional Law, Sec. 110. Also see the other authorities 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 preparation 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 heretofore 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 nonexempt 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'raternal and 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 gratuities 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 nonexempt 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-