Rev. Ruling 57-428
Special Tax Liability of Clubs
Advice has been requested whether a locker fund club, operated in the manner described below, incurs liability for special tax as a retail liquor dealer through the sales of liquors to the clubs members.
Each participating members pays a fixed fee for a membership card which entitles him to make purchases of liquor from the club stock. The member furnishing the money does not specify that a stated kind or quantity of liquor be purchased for him but merely goes to the premises, makes his selection of liquors, and pays cash for them. The purchasing agent for the club replenishes the supplies at regular intervals by using cash receipts as well as membership fees to buy whatever liquors are in short supply on the club premises.
Section 194.37 of the Regulations relating to Liquor Dealers provides that a club or similar organization which furnishes liquor to its members under conditions constituting sale is required to pay special tax. Section 194.38 provides that a club or similar organizations which sells liquors to its members by accepting orders therefore, furnishing the liquors so ordered, and collecting the price thereof, is required to pay special tax. Section 194.40 of the regulations provides that special tax is not incurred when a club or similar organization collects money in advance from its members for the purchase of liquors for their consumption, or advances such money upon an agreement with the members for reimbursement, but that special tax is incurred if it purchases liquors without prior agreement with the members and subsequently recoups.
It is held that the pooling of monies collected from the members for the purchase of a stock of liquors for resale in the manner outlined does not constitute a bona fide locker system exempt from special tax under section 194.40 of the regulations, but, in fact, involves the sale of liquor by the agency to the participating members, and the incurrence of special tax liability as a retail liquor dealer.
26 U.S.C. 5121; 27 CFR 194.37 (27 CFR 194.29)