June 26, 1996

I. Facts

You seek a ruling on behalf of *************** (the "Company"). The Company operates as a combination restaurant/brewery. The Company has a license to sell malt beverages for consumption on the premises under the provisions of G.L. c. 138, § 12. The Company also has a license to manufacture and sell malt beverages, both at wholesale and retail, for consumption off the premises, as allowed by G.L. c. 138, § 19C.

The Company asks whether the excise imposed under General Laws Chapter 138, section 21 on sales of alcoholic beverages by certain manufacturers and sellers is applicable to sales of malt beverages by a farmer-brewer, operating under a license granted according to General Laws Chapter 138, sections 12 and 19C. The Company contends that these provisions, when read together, subject its sales of malt beverages to double taxation.

II. Discussion of Law

General Laws Chapter 138, section 12 gives local licensing authorities the power, subject to the prior approval of the Alcoholic Beverage Control Commission, to grant an applicant, typically a restaurant, tavern, or hotel, a license to sell alcoholic beverages (of any nature) for on-premises consumption. No tax is levied under this section, but rather a license fee is charged, set by the local licensing authorities.

The qualifications an applicant must meet in order to receive a license to operate as a farmer-brewer are set out in General Laws Chapter 138, § 19C. A license granted under G.L. c. 138, § 19C permits a farmer-brewer to sell malt beverages wholesale and, with certain restrictions, at retail for off-premises consumption. An annual fee for this license is also charged, based on the amount of malt beverages produced during the year by the farmer-brewer.

General Laws Chapter 138, section 21 imposes an excise tax on the sale of all alcoholic beverages in Massachusetts by manufacturers and other sellers. The statute provides, in pertinent part, ". . . every farmer-brewer under section nineteen C . . . shall, in addition to the license fees elsewhere provided in this chapter, be liable for and pay to the commonwealth an excise, for the privilege enjoyed by him, as such . . . farmer-brewer . . . to be levied on sales within the commonwealth of alcoholic beverages . . . ." Id. The excise is calculated according to a schedule set forth in the statute. No exemption is provided for sales for on-premises consumption by farmer-brewers. Additionally, farmer-brewers are required to file monthly returns with the Commissioner reporting their sales of alcoholic beverages under G.L. c. 62C, § 16(k).

Only one excise, or tax, is imposed on the activities of farmer-brewers under sections 12, 19C and 21 of General Laws Chapter 138. Sections 12 and 19C are not taxes, but license fees that the Company must pay to sell malt beverages for both on and off-premises consumption in its operation as both a restaurant and a brewery. Under section 21, however, an excise is imposed on sales of all alcoholic beverages by certain manufacturers and sellers. If the Company functions as a restaurant and a brewery and sells alcoholic beverages both for on and off-premises consumption, the Company is responsible for paying the license fees mandated by sections 12 and 19C as well as the excise imposed under section 21. [1]

Although sales of alcoholic beverages are generally exempt from the sales tax under G.L. c. 64H, § 6(g), sales of alcoholic beverages for on-premises consumption are considered to be sales of "meals" and as such are separately taxed under sections 2 and 6(h) of General Laws Chapter 64H when sold by a restaurant. [2] The sales tax is calculated based on the "sales price" of the meal sold and is collected at the time the sale occurs. G.L. c. 64H, § 1. The vendor of the meal, in this case the Company, operating as a restaurant, is responsible for collecting the tax from its customer and paying it over to the Commissioner in accordance with the schedule set forth in G.L. c. 62C, § 16. See G.L. c. 64H, § 2.

The sales tax on meals imposed under G.L. c. 64H, §§ 2, 6(h), and the excise tax on alcoholic beverages under G.L. c. 138, § 21 are both taxes that involve, to a varying degree, sales of alcoholic beverages. While the sales tax is a transactional tax imposed on sales of meals, the excise tax, although measured by sales of alcoholic beverages, is imposed on the privilege of doing business in Massachusetts as a farmer-brewer (or other manufacturer or seller). There is no double taxation here. Double taxation occurs only when "a tax is levied twice on the same transaction." Pyburn v. Commissioner of Revenue, A.T.B. Docket No. 148712 (1992).

III. Conclusion

The Company is responsible for paying the license fees under G.L. c. 138, §§ 12, 19C in order to operate as both a restaurant and a brewery, as well as the excise imposed under G.L. c. 138, § 21 on the sale of all alcoholic beverages. The Company is also responsible for collecting and paying over the sales tax due on its sales of meals in accordance with G.L. c. 62C, § 16 and G.L. c. 64H, § 2.

Very truly yours,

/s/Mitchell Adams

Mitchell Adams
Commissioner of Revenue

MA:HMP:rmh

LR 96-2



[1] For a discussion of the characteristics of a fee versus those of a tax, see Emerson College v. City of Boston, 391 Mass. 415, 423-427 (1984) and cases cited therein.

[2] The concept that alcoholic beverages are taxable as "meals" is a long-standing Department interpretation of the sales tax statute that has been upheld continuously by the Appellate Tax Board. See Department of Revenue Letter Ruling 81-31; R&D Restaurant Co. Inc. v. Commissioner of Revenue, A.T.B. Docket No. 128704 (1984); Trodes, Inc. v. Commissioner of Revenue, A.T.B. Docket No. 152055 (1988); Roadside Tavern Restaurant, Inc. v. Commissioner of Revenue, A.T.B. Docket No. 195291 (1994).