1. (a) Exemptions.

   1. (1) Sales or use tax is not due on charges for admission to night clubs, dance halls, discos, etc., when the charges are subject to tax under the Texas Alcoholic Beverage Code, §202.02. If the gross receipts tax paid on cover charges is later refunded, sales tax will be due on the amount collected as a fee for admission to an amusement service.
   2. (2) Sales or use tax is not due on the sale of mixed beverages and gratuities collected on those sales if the receipts are taxable under the Texas Alcoholic Beverage Code, §202.02. If the gross receipts tax paid on ice and nonalcoholic beverages is later refunded by the Texas Alcoholic Beverage Commission, sales tax is due on the original sales price.
2. (b) Issuance of exemption certificates. Persons holding mixed beverage permits, late hour mixed beverage permits, or daily temporary mixed beverage permits issued by the Texas Alcoholic Beverage Commission are entitled to issue exemption certificates to their suppliers in lieu of the sales tax on the purchase of alcoholic beverages, ice, mixes, and nonalcoholic beverages if the receipts from their resale are taxable under Texas Alcoholic Beverage Code, §202.02.
3. (c) Resale. Sales of liquor, wine, beer, or malt liquor from a licensed manufacturer, wholesaler, or distributor to a retailer licensed under the Texas Alcoholic Beverage Code are presumed to be for resale. No resale certificate will be required.
4. (d) Complimentary drinks. Any person who provides drinks to others without charge owes sales tax on the cost of the ingredients of the drinks.

5. (e) Private club permittee.

   1. (1) Sales or use tax is not due on the sale of mixed beverages, and gratuities collected in connection therewith, if the beverages are to be served on the premises of the clubs to members or their guests and if the receipts are taxable under the Texas Alcoholic Beverage Code, §202.02.
   2. (2) A private club is required to collect sales tax on the sales price of prepared foods, candy, meals, and other food products prepared, served, or sold for immediate consumption, whether or not sold in connection with the serving of alcoholic beverages. Charges for meals or other food products are subject to sales tax and must be separated from the charges for alcoholic beverages served to members and guests. For discussion of food and drinks sold for immediate consumption, §3.293 of this title (relating to Food; Food Products; Meals; Food Service).
   3. (3) The sales or use tax must be paid by a private club on all supply items, equipment, and replacement parts for the equipment which the club uses or consumes in providing service. See §3.293 of this title (relating to Food; Food Products; Meals; Food Service).
   4. (4) A resale or exemption certificate may be issued by a private club in lieu of paying the sales tax for the purchase of those items furnished to members and guests with beverages, food products, or meals served for immediate consumption. The items must be of a nonreusable nature or qualify for exemption as wrapping or packaging materials. See §3.293 of this title (relating to Food; Food Products; Meals; Food Service).

6. (f) Fraternal and veteran's organizations.

   1. (1) Fraternal and veteran's organizations, which do not qualify for a private club exemption certificate, may purchase beer, wine, or ale tax free from a distributor or other retailer only when the organization holds and maintains a valid retail dealer's on premise license, issued under Texas Alcoholic Beverage Code, §69.01, or a valid wine and beer retailer's permit, issued under Texas Alcoholic Beverage Code, §26.01. In addition to either of the above licenses, the organization must possess and publicly display a limited sales tax permit as a retailer. When an organization holds the required license and permit, it must collect the tax on all sales of beer, wine, or ale.
   2. (2) When a fraternal or veteran's organization handling alcoholic beverages does not hold either of the retail licenses issued by the Texas Alcoholic Beverage Commission, it must pay sales tax on its purchases of alcoholic beverages.
7. (g) Certificates required. The burden of proving that a sale is exempt is upon the seller, unless the seller requires the purchaser to furnish an exemption or resale certificate. The exemption or resale certificate relieves the seller from the burden of proof only if taken in good faith. See §3.285 of this title (relating to Resale Certificate; Sales for Resale) and §3.287 of this title (relating to Exemption Certificates).

Source Note:The provisions of this §3.289 adopted to be effective January 1, 1976; amended to be effective March 24, 1978, 3 TexReg 816; amended to be effective August 11, 1978, 3 TexReg 2562; amended to be effective October 19, 1984, 9 TexReg 5162; amended to be effective September 4, 1990, 15 TexReg 4834.