FACTS: The Post, a chartered veterans' organization, holds functions for its members and guests only ("member functions") at which alcoholic beverages are served. The Post also rents out a function room located in its facility for "non-member functions" at which the Post sells alcoholic beverages.
ISSUE: How is the exemption afforded under G.L. c. 63A, § 2 affected by sales of alcoholic beverages by the Post to attendees of non-member functions?
DIRECTIVE: If the Post rents or loans out its facility for non-member functions, the Chapter 63A excise is calculated on the basis of the gross receipts from the sale of alcoholic beverages sold at non-member functions only, provided that the Post keeps separate records of the sale of alcoholic beverages sold at member functions and non-member functions. If separate records are not kept, then the Chapter 63A excise is based on all sales of alcoholic beverages by the Post.
DISCUSSION OF LAW:
Certain corporations, associations, and organizations that do not pay corporate excise but that do sell alcoholic beverages are subject to tax under G.L. c. 63A. General Laws Chapter 63A, section 2 imposes an entity level tax of one half of one percent of a taxpayer's gross receipts realized from the sale of alcoholic beverages. "Taxpayer" is defined as every corporation, association or organization which is licensed by any city or town to sell alcoholic beverages, except a corporation subject to tax under the provisions of G.L. c. 63 and a chartered veterans' organization maintaining quarters for the exclusive use of its members. See, G.L. c. 63A, § 1(c)(2).
As long as separate records are kept, a veterans' organization may treat its receipts from sales of alcoholic beverages at non-member functions as separate and distinct from receipts from such sales at its functions that are exclusively for members and members' guests. If separate records are kept, only the receipts from alcoholic beverages sold at non-member functions will be included in the measure of the excise under Chapter 63A. If separate records are not kept, however, receipts from all sales of alcoholic beverages by the veterans' organization will be included in the calculation of the veterans' organization's Chapter 63A excise, regardless of the type of function.
B. Examples of Member and Non-Member Functions
The following are examples of common member and non-member functions.
1) A Post function that is open to the public is considered a non-member function.
2) When the Post function room is used by a member for personal or business purposes, such as for a family party, wedding reception, business event or other private occasion, the use of the room is considered to be for a non-member function, whether or not the member pays a fee for the use of the room and whether or not other Post members attend.
3) When the Post facility is rented or loaned out to another chartered veterans' organization for a function that includes only members of that organization and their guests, or combined members and guests of the two organizations, the function is considered a member function whether or not a fee is charged for the use of the facility.
4) When the Post facility is rented or loaned out for a non-member function at which no alcohol will be sold, the calculation of the Post's chapter 63A excise, if any, is not affected.
5) If the Post has an auxiliary organization, such as a group comprised of the spouses of members of the Post, such auxiliary members are considered members of the Post, for purposes of this Directive.
If the Post rents or loans out its facility for non-member functions but keeps separate books and records of the sale of alcoholic beverages sold at member functions and non-member functions, the Chapter 63A excise is calculated on the basis of the gross receipts from the sale of alcoholic beverages sold at non-member functions only.
Commissioner of Revenue
July 12, 1995