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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER HHMIXED BEVERAGE TAX
RULE §3.1001Mixed Beverage Gross Receipts Tax

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Alcoholic beverage--Alcohol, or any beverage containing more than 0.5% of alcohol by volume, which is capable of use for beverage purposes, either alone or diluted.

  (2) Complimentary alcoholic beverage--An alcoholic beverage served without any consideration paid to the permittee.

  (3) Mandatory gratuity charge--Any amount required by the permittee in excess of the charge for the sale of alcoholic beverages.

  (4) Minibar--A closed container, cabinet, or other device in a hotel guestroom that contains alcoholic beverages for use by guests registered in the hotel.

  (5) Mixed beverage--A serving of a beverage composed in whole or in part of an alcoholic beverage in a sealed or unsealed container of any legal size for consumption on the premises where served or sold by the holder of a mixed beverage permit, a private club registration permit, a private club exemption certificate permit, and any of the auxiliary permits held by the permittee.

  (6) Permittee--A person, agent, or the officer, director, manager or managing general partner of an entity that is the holder of a mixed beverage permit, a mixed beverage late hours permit, a mixed beverage permit holding a food and beverage certificate, a daily temporary mixed beverage permit, a private club registration permit, a private club exemption certificate permit, a private club late hours permit, a daily temporary private club permit, a private club registration permit holding a food and beverage certificate, or a caterer's permit issued by the Texas Alcoholic Beverage Commission.

  (7) Qualified employees--Employees who customarily and regularly provide the service upon which a gratuity is based, including, but not limited to, waiters, waitresses, busboys, service bartenders, wine stewards, and maitres d'hotel. The term does not include janitorial help, chefs, cashiers, or dishwashers.

  (8) Reasonable mandatory gratuity charge--Mandatory gratuity charges that do not exceed 20%.

  (9) Source record--A dated customer service check or ticket; a dated cash register receipt, if coded to reflect all required information; or the equivalent of a customer service check or cash register receipt in some other form subject to approval by the comptroller.

  (10) Temporary membership card--A card printed and sold to a private club by the Texas Alcoholic Beverage Commission. The card is then sold by the private club to an individual and entitles that individual to all the privileges of membership in the private club for a period not to exceed three days. The card also entitles the holder to bring not more than three persons into the club as the holder's guests.

  (11) Total direct compensation--Total salaries paid to qualified employees. The term does not include other benefits paid or incurred on an employee's behalf, such as health and life insurance, sick leave, or vacation time.

  (12) Voluntary gratuity--A tip added to the bill at the suggestion of the purchaser or money given freely by the purchaser over and above the price charged for the sale or service of alcoholic beverages.

  (13) Walked checks or tabs--An industry term that refers to the instance of a customer that on a particular business day consumes alcoholic beverages and leaves the permittee's premises without paying or providing the appropriate consideration for the alcoholic beverages.

(b) Mixed beverage gross receipts tax. A tax at the rate of 14% imposed on the gross receipts of a permittee received from the sale, preparation, or service of alcoholic beverages or from the sale, preparation, or service of ice or nonalcoholic beverages that are sold, prepared, or served for the purpose of being mixed with an alcoholic beverage and consumed on the premises of the permittee.

  (1) The mixed beverage gross receipts tax is a tax on gross receipts and is not to be added to the charge for the sale or service of the alcoholic beverage and cannot be considered included in the gross receipts amount.

  (2) Each permittee must file a monthly return due on the 20th day of the following month. If no sales or services of alcoholic beverages are made during a month, a report indicating that fact must be filed.

(c) Taxable mixed beverage receipts. The mixed beverage gross receipts tax applies to, but is not limited to, receipts for the following items:

  (1) receipts from the sale or service of alcoholic beverages;

  (2) receipts from the sale or service of nonalcoholic beverages that are mixed and consumed with alcoholic beverages on the permittee's premises;

  (3) receipts from cover charges, door charges, entry fees, or admission fees only when the Texas Alcoholic Beverage Commission has determined that the collection of the cover charge or admission fee is in violation of the Texas Alcoholic Beverage Commission rules or regulations. The tax base will be the entire receipts from the cover charge or admission fee plus the reduced sales or service prices received for the alcoholic beverages;

  (4) the normal selling price of alcoholic beverages served with meals with no separate charge. If the specific alcoholic beverage is being sold or served at a reduced price at the same time as the meal, the tax base for the alcoholic beverage will be the reduced price;

  (5) any portion of a reasonable mandatory gratuity charge that is not disbursed to qualified employees;

  (6) mandatory gratuity charges when in excess of 20%. If a mandatory charge exceeds 20% then the entire mandatory gratuity charge is subject to mixed beverage gross receipts tax regardless of how the gratuity is disbursed;

  (7) miscellaneous charges in conjunction with the sale or service of alcoholic beverages such as bar set-up fees, bartender fees, corkage fees, maitres d'hotel charges, etc., are subject to the mixed beverage gross receipts tax;

  (8) all sales or services of alcoholic beverages by caterers;

  (9) all sales or services of alcoholic beverages sold or served by the holder of a temporary permit listed in subsection (a)(6) of this section or by the holder of a beer and wine only temporary permit issued to a mixed beverage permittee;

  (10) all sales of coupons, tokens, tickets, etc., that are redeemed or used in any manner to purchase or pay for the service of an alcoholic beverage; and

  (11) thefts of money or legal tender received from the sale or service of alcoholic beverages are not deductible from the mixed beverage tax base.

(d) Private clubs, special events, and functions. Mixed beverage gross receipts tax on alcoholic beverages served at special events or functions such as golf or tennis tournaments at private clubs, when a lump-sum charge entitles the member or guest to various items such as green fees, food, alcoholic beverages, golf cart rentals, etc., shall be computed by one of the following methods.

  (1) The club shall maintain documentation that shows the normal cost to a member or guest for each of the items provided for the lump-sum charge. The permittee will then compute the percentage of the total of all the charges attributable to the sale or service of the alcoholic beverages. This percentage then will be applied to the actual lump-sum amount paid by the member or guest to derive the tax base for the mixed beverage gross receipts tax. For example, if the total of all the items would normally cost $300 and the permittee estimates that the portion attributable to the sale or service of alcoholic beverages is $30, then 10% of the actual lump-sum amount would be reported as subject to the mixed beverage gross receipts tax. If the amount paid by the member or guest is $200, then $20 would be the tax base. The documentation used by the permittee is subject to review by the comptroller's personnel and any amounts determined to be inaccurate or unreasonable may be adjusted.

  (2) The permittee may choose to use the normal sales or service prices of the alcoholic beverages as the tax base for the mixed beverage gross receipts tax.

(e) Nonprofit organizations holding fundraising and other special events where 100% of the net profit of the event goes to the nonprofit organization. Nonprofit organizations with an IRS Section 501(c)(3), (4), (8), (10), or (19) status who are issued a temporary mixed beverage permit will determine the mixed beverage gross receipts tax base in the following situations:

  (1) if tickets are sold to an event with an open bar, the nonprofit organization owes mixed beverage gross receipts tax on their cost of the alcoholic beverages purchased for the event:

  (2) if tickets are sold to an event with an open bar and the alcoholic beverages are donated to the nonprofit organization, the nonprofit organization does not owe mixed beverage gross receipts tax or use tax as provided by Tax Code, Chapter 151, on the donated alcoholic beverages, but owes mixed beverage gross receipts tax on the cost of any alcoholic beverages purchased for the event;

  (3) if an event is one with a cash or ticket bar (with or without an entry fee), the nonprofit organization owes mixed beverage gross receipts tax on the total receipts from the sale and service of alcoholic beverages;

  (4) if an event is one with no entry fee and open bar, the nonprofit organizations does not owe mixed beverage gross receipts tax, but owes use tax as provided by Tax Code, Chapter 151, on the cost of any alcoholic beverages purchases for the event.

(f) Items excluded from the mixed beverage gross receipts tax base.

  (1) Complimentary alcoholic beverages served without any consideration paid to the permittee. Use tax as provided by Tax Code, Chapter 151, is due on the taxable ingredients of the complimentary alcoholic beverages.

  (2) Complimentary alcoholic beverages served during promotional periods such as happy hours at hotels or motels. If, however, there is an increase in guest room rates attributable to the promotional periods, the comptroller will have the option to tax either the increase in the room rate under Tax Code, Chapter 156, or assess use tax on the taxable ingredients of the complimentary drinks. The comptroller will have the authority to use information such as the room rates at comparable hotels and motels in the area to determine if an increased rate is attributable to the promotional period alcoholic beverages.

  (3) Complimentary alcoholic beverages served to holders of free drink cards or free drink tokens, for which no consideration was paid to the permittee.

  (4) Voluntary gratuities.

  (5) Reasonable mandatory gratuity charges.

  (6) Walked checks or tabs. These differ from bad debts in that no agreement exists to extend credit to the customer or guest.

  (7) Receipts from cover charges, door charges, entry fees, or admission fees that are assumed for entertainment, food specials, and other purposes. Sales tax as provided by §3.298 of this title (relating to Amusement Services) is due on these receipts.

  (8) Bad debts. The unpaid portion of the gross receipts on sales or services that have been charged off the books as a bad debt and that are deducted for federal tax purposes during the same or subsequent reporting period.

(g) Alcohol loss. No mixed beverage gross receipts tax is due on alcoholic beverages destroyed due to spillage or breakage.

(h) Inventory for cooking. Alcoholic beverages used in cooking may be stored with regular bar stock or in a separate storage area. The withdrawal from inventory of alcoholic beverages used in cooking must be recorded at the time of withdrawal on a service check or other permanent record.

(i) Mandatory gratuity charges.

  (1) Reasonable mandatory gratuity charges are specifically excluded from the mixed beverage gross receipts tax base if they are:

    (A) separated from the sales price of the alcoholic beverage served;

    (B) identified as a tip or gratuity by any reasonable means, including such terms as service fee or service charge; and

    (C) disbursed to qualified employees. Any portion of a reasonable mandatory gratuity charge that is retained by the employer is subject to mixed beverage gross receipts tax.

  (2) Mandatory gratuity charges in excess of the 20%. If a mandatory charge exceeds 20% then the entire mandatory gratuity charge is subject to mixed beverage gross receipts tax regardless of how they are disbursed.

(j) Record requirement. Records required by the comptroller for mixed beverage permittees must be kept for a period of four years. Records must be made available upon request within a reasonable time for examination by the comptroller or authorized agents or employees. The records, in general, must reflect the total gross receipts from the sale or service of alcoholic beverages and those associated services that are subject to the gross receipts tax, as provided by subsections (c), (d) and (e) of this section. Records may be written, kept on microfilm, or stored on data processing equipment. Permittees must contact the Texas Alcoholic Beverage Commission for information concerning Texas Alcoholic Beverage Commission record keeping requirements.

(k) Source records.

  (1) The following information is required to be printed on a source record in a manner that makes such information clearly evident or by a system of symbols (codes) if such symbols and their meaning are printed on the source record or maintained on the licensed premises.

Cont'd...

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