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

   1. (1) Alcoholic beverage--Alcohol, or any beverage containing more than one-half of one percent of alcohol by volume, which is capable of use for beverage purposes, either alone or diluted.
   2. (2) Complimentary alcoholic beverage--An alcoholic beverage served without any charge for the alcoholic beverage to the person served.
   3. (3) Gratuities--An amount given voluntarily by a customer or member for the sale or service of alcoholic beverages in addition to the charge for the alcoholic beverages or an amount that is mandatory based on a percentage or other amount established by the permittee in excess of the charge for the sale or service of the alcoholic beverages.
   4. (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. (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 permitholders.
   6. (6) Permittee--A holder of a mixed beverage permit, a mixed beverage late hours permit, a mixed beverage permittee 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 permittee holding a food and beverage certificate, or a caterer's permit issued by the Texas Alcoholic Beverage Commission.
   7. (7) 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.
   8. (8) 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.

2. (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. (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. (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.

3. (c) Taxable mixed beverage receipts. The Mixed Beverage Gross Receipts Tax applies to, but is not limited to, receipts for the following items:

   1. (1) receipts from the sale or service of alcoholic beverages;
   2. (2) receipts from the sale or service of nonalcoholic beverages that are mixed and consumed with alcoholic beverages on the permittee's premises;
   3. (3) receipts from cover charges, door charges, entry fees or admission fees that are related to reduced prices for alcoholic beverages as described in 16 TAC §45.103 (Regulations of "Happy Hour"). If cover charges are determined to be related to reduced prices for alcoholic beverages, the tax base will be the entire receipts from the cover charge plus the reduced sales or service prices received for the alcoholic beverages;
   4. (4) as an alternative to paragraph (3) of this subsection, a permittee may elect to report the services or sales of alcoholic beverages at the normal service or selling price and exclude the cover charges, door charges, entry fees or admission fees from the tax base. The normal sales or service price is the price charged for the alcoholic beverage when no cover charge, door charge, entry fee, or admission fee is collected. When the permittee elects to use this option, the cover charges, door charges, entry fees, or admission fees will be subject to sales tax under §3.298 of this title (relating to Amusement Services);
   5. (5) 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 promotional price at the same time as the meal, the tax base for the alcoholic beverage will be the promotional price. This subsection refers to promotions usually promoted as "free drink(s) with a meal";

   6. (6) mandatory gratuities of 20% or less that are not entirely distributed to qualifying employees. "Qualifying employees" are employees such as, but not limited to, waitpersons, buspersons, bartenders, wine stewards, and maitre who customarily and regularly provide the services upon which the charge is based. Nonqualifying employees or recipients include, but are not limited to, owners, club managers with no direct involvement in the particular event, janitorial help, chefs, cashiers, and dishwashers.

      1. (A) If compensation is made to nonqualifying employees or recipients, the entire portion of the gratuity attributable to the sale or service of alcoholic beverages is subject to the mixed beverage gross receipts tax.
      2. (B) If the total direct compensation due all qualifying employees during each reporting period (month) equals or exceeds the total amount collected as mandatory gratuities and no compensation is paid nonqualifying employees, the mandatory gratuity is exempt from the mixed beverage gross receipts tax;
   7. (7) all mandatory gratuities that exceed 20% of the charge for alcoholic beverages are subject to the mixed beverage gross receipts tax;
   8. (8) miscellaneous charges in conjunction with the sale or service of alcoholic beverages such as bar set-up fees, bartender fees, corkage fees, maitred hotel charges, etc., are subject to the mixed beverage gross receipts tax;
   9. (9) all sales or services of alcoholic beverages by caterers;
   10. (10) 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 permit holder;
   11. (11) 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
   12. (12) thefts of money or legal tender received from the sale or service of alcoholic beverages are not deductible from the mixed beverage tax base.

4. (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. (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. (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.

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

   1. (1) Complimentary alcoholic beverages served without any charge to the recipient. Use tax as provided by the Tax Code, Chapter 151, is due on the taxable ingredients of the complimentary alcoholic beverages.
   2. (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 the 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. (3) Complimentary alcoholic beverages served to holders of free drink cards or free drink tokens, for which no consideration was paid by the holder.
   4. (4) All voluntary gratuities.
   5. (5) All mandatory gratuities, not to exceed 20% of the charge for the alcoholic beverages, that are distributed to qualifying personnel as outlined in subsection (c)(6) and (c)(6)(B) of this section.
   6. (6) Walked checks or tabs. These differ from bad debts in that no agreement exists to extend credit to the customer or guest.
   7. (7) Receipts from cover charges, door charges, entry fees, or admission fees that are not related to reduced prices for alcoholic beverages and 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. (8) Cover charges collected when the permittee elects to use the reporting method described in subsection (c)(4) of this section.
   9. (9) Bad debts. The unpaid portion of the gross receipts on sales or services made on or after August 28, 1995, 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.
6. (f) Alcohol loss, sales tax not due. Although use tax per the Tax Code, Chapter 151, is due on the taxable ingredients of complimentary drinks, no use tax is due on alcoholic beverages that are destroyed due to spillage or breakage or used in cooking.

Source Note:The provisions of this §3.1001 adopted to be effective April 3, 1996, 21 TexReg 2475.