Texas Comptroller of Public Accounts    STAR System


11202205L



February 14, 2011



*************
*************
*************

Dear *************

This message is in response to your questions concerning how a client should 
document returned drinks and how to report mixed beverage tax on lump-sum sales 
that include food and alcoholic beverages. It was a pleasure to speak with you.

Returned Drinks
You stated that when a drink is returned it is voided in the Point-of-Sale 
(POS) system and then listed on the spillage report after pouring it out. Your 
client was informed by someone (either the TABC or the Comptroller) that the 
returned drink should be shown as a “return” so that it flows through the 
reporting/accounting figures.

What happens to a returned drink determines how it is documented. If the 
bartender, for instance, pours out the drink, it is documented as spillage; if 
the bartender gives the drink to another patron, it is documented as a 
complimentary drink. Use tax, as provided by Tax Code Chapter 151, Subchapter 
D, is due on taxable ingredients of the complimentary drink.

A POS system’s documentation may be used if the system accounts for returned 
drinks such that returned drinks are not part of gross receipts and documented 
as spillage. The POS system should document the type and cost of each returned 
drink by date and provide the number of returned drinks and total cost of 
returned drinks on a daily basis. Returned drinks that are given away instead 
of being poured out must be recorded as complimentary, either on the POS system 
or by separate record with the appropriate use tax reported and paid on taxable 
ingredients.

If the POS system accounts for returned drinks as described above, then the 
returned drink documentation can be used.

Lump-Sum Sales
Rule 3.1001(c)(4) provides that mixed beverage gross receipts tax applies to 
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 reduced price can be used.

Section (d) of the rule that you mentioned describes how private clubs 
determine taxable mixed beverage receipts at special events or functions when a 
lump-sum charge entitles members or guests to various items, such as green 
fees, food, alcoholic beverages and golf cart rental at a golf tournament. One 
option is to determine the normal selling price for all items in the lump-sum 
charge. The percentage of the total normal charges that is attributable to the 
sale or service of alcoholic beverages can then be applied to the actual 
lump-sum charge.

Using the rule’s example, if the total of all items normally cost $300 and $30 
of the charge is attributable to the sale or service of alcoholic beverages, 
the club may apply 10% to the actual lump-sum amount to determine taxable mixed 
beverage receipts (e.g., $200 actual amount x 10% = $20 in mixed beverage 
receipts).

The other option is to report the normal selling price of the alcoholic 
beverages. Any mixed beverage permittee can use either of these two methods to 
determine taxable mixed beverage receipts for special events and functions 
where more than just food and alcoholic beverages are provided. You did not 
indicate that your client’s sales were for at a special event or function, so 
these methods would not apply.

When a lump-sum charge includes alcoholic beverages and items subject to 
limited sales tax (e.g., meals, admission fees, etc.), sales tax is due on the 
portion of the lump-sum charge attributable to the sale of the taxable items. 
Sales tax Rule 3.289(b) provides that sales and use tax is not due on the sale 
of mixed beverages, including ice or nonalcoholic beverages that are mixed 
with, or are intended to be mixed with, alcoholic beverages, and gratuities 
collected on those sales, if the receipts are subject to mixed beverage tax.

Sales tax may be backed out of the portion attributable to the sale of taxable 
items if the lump-sum charge is identified to the customer on a bill, receipt 
or ticket as including sales tax.

Links to rules and other tax information are on each individual tax’s Web page; 
links to individual tax pages are on our “Texas Taxes” Web page at 
http://window.state.tx.us/taxes/index.html.

This opinion is based on the facts presented and current law. Other facts, 
though similar, may result in different answers.

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If you have questions or need more information, please contact me.

Sincerely,


Donald S. Dillard
Oil & Gas, Fuels and Miscellaneous Taxes
Tax Policy Division
Texas Comptroller of Public Accounts
P.O. Box 13528
Austin, Texas  78711-3528


From: *************
Sent: Saturday, January 29, 2011 2:42 PM
To: Donald Dillard
Subject: Procedure to Record Returned Mixed Drinks

1/29/11

Don,

When we last spoke on Friday, I understood that you were going to provide me 
with some documentation concerning how my client, which holds a Mixed Beverage 
Permit, should be recording alcoholic drinks that had been returned by its 
customers.  Previously, upon return of a drink, they had been voiding the entry 
in their POS system and then listing the drink on the spillage report after 
pouring it out.  This seemed perfectly reasonable to me as the revenue was 
voided (and with no revenue, no Mixed Beverage Gross Receipts Tax would be due) 
and the destruction of the product was recorded.  They were subsequently 
informed by someone (either with the TABC or more likely the Comptroller), that 
the returned drink should be shown as a "return" so that it flows through the 
reporting/accounting figures.

The goal is to determine the proper procedure for recording drinks that are 
returned by guests and subsequently poured out.

Thanks for your help.


*************
*************
*************




ACCESSION NUMBER: 201102205L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 02/14/2011
TAX TYPE: MIXED BEVERAGE