The state of Texas imposes two taxes on alcoholic beverages that impact holders of certain permits under the Texas Alcoholic Beverage Code. These taxes are the mixed beverage gross receipts tax and the mixed beverage sales tax. Both are set forth in Texas Tax Code, Chapter 183 (“Chapter 183”) and Texas Comptroller Rule 3.1001 (“Rule 3.1001”).[1]
Who’s Subject to Mixed Beverage Taxes?
The folks who get hit with mixed beverage taxes (other than consumers) are what are called “permittees.” [2] Chapter 183 defines a “permittee” is defined as someone who holds one of the following permits under the Texas Alcoholic Beverage Code:
- a mixed beverage permit;
- a private club registration permit;
- a private club exemption certificate;
- a private club registration permit with a retailer late hours certificate;
- a nonprofit entity temporary event permit;
- a private club registration permittee holding a food and beverage certificate;
- a mixed beverage permit with a retailer late hours certificate;
- a mixed beverage permit with a food and beverage certificate; or
- a distiller’s and rectifier’s permit.[3]
What’s a Mixed Beverage?
Chapter 183 defines a “mixed beverage” as “a beverage composed in whole or part of an alcoholic beverage in a sealed or unsealed container of any legal size for consumption on the premises when served or sold by the holder of a mixed beverage permit, the holder of certain nonprofit entity temporary event permits, the holder of a private club registration permit, or the holder of certain retailer late hours certificates.”[4]
What’s the Mixed Beverage Gross Receipts Tax?
A 6.7% tax is imposed on the gross receipts of a permittee from the sale, preparation, or service of mixed beverages as well as 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.[5] Taxable mixed beverage gross receipts also include:
- receipts from cover charges, door charges, entry fees, or admission fees when the TABC has determined that the collection of the cover charge, door charge, entry fee, or admission fee is in violation of TABC rules or regulations;
- the normal selling price of alcoholic beverages served with meals with no separate charge;
- any portion of a reasonable mandatory gratuity charge that is not disbursed to qualified employees;
- the entire mandatory gratuity charge when in excess of 20%, regardless of how the gratuity is disbursed;
- miscellaneous charges in conjunction with the sale or service of alcoholic beverages such as bar set-up fees, bartender fees, corkage fees, maîtres d’hôtel charges, etc.;
- all sales or services of alcoholic beverages by caterers;
- all sales or services of alcoholic beverages sold or served by the holder of a temporary permit or by the holder of a beer and wine only temporary permit issued to a mixed beverage permittee; and
- all sales of coupons, tokens, tickets, etc., that are redeemed or used in any manner to purchase or pay for the sale or service of an alcoholic beverage.[6]
Receipts not included in the mixed beverage gross receipts tax base include:
- complimentary alcoholic beverages (although use tax under Texas Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax) is due on taxable ingredients used to make the complimentary alcoholic beverages);
- complimentary alcoholic beverages served during promotional periods such as happy hours at hotels or motels (although if there is an increase in the guest room rates attributable to these promotional periods, the Comptroller has the option to tax either the increase in the room rate under Tax Code, Chapter 156 (Hotel Occupancy Tax), or assess use tax on the taxable ingredients of the complimentary drinks);
- complimentary alcoholic beverages served to holders of free drink cards or free drink tokens, for which no consideration is paid to the permittee;
- voluntary gratuities;
- reasonable mandatory gratuity charges of 20% or less that are separated from the sales price of the alcoholic beverage being served, identified as a tip or gratuity, and disbursed to employees who customarily and regularly provide the service upon the gratuity is based;
- walked checks or tabs;
- receipts from cover charges, door charges, entry fees, or admission fees that are for entertainment, food specials, and other purposes, and receipts from the sale of temporary membership cards (although these receipts would be subject to sales tax as amusement services under Tax Code, Chapter 151);
- bad debts;
- mixed beverage sales taxes;
- alcohol loss due to spillage or breakage; and
- alcoholic beverages used in cooking.[7]
Permittees are allowed to provide an informational statement to customers disclosing the amount of mixed beverage gross receipts tax to be paid by the permittee in relation to the mixed beverage sold, although they may not separately charge the customer for this tax.[8]
What’s the Mixed Beverage Sales Tax?
An 8.25% tax is imposed on each mixed beverage sold, prepared, or served by a permittee in this state and on ice and each nonalcoholic beverage sold, prepared, or served by a permittee in Texas for the purpose of being mixed with an alcoholic beverage and consumed on the premises of the permittee.[9] The tax base for mixed beverage sales tax generally is the same as for mixed beverage gross receipts tax and is generally administered, collected, and enforced in the same way as sales and use tax under Texas Tax Code, Chapter 151 is administered, collected, and enforced.[10]
What About To-Go Drinks?
In 2021, the Legislature amended the Texas Alcoholic Beverage Code to allow holders of mixed beverage permits with a food and beverage certificate and private club registration permit holders with a food and beverage certificate to sell alcoholic beverages with to-go food orders under certain circumstances.[11]
As you might have noticed, mixed beverage gross receipts tax and mixed beverage sales tax are both keyed to on-premises consumption of an alcoholic beverage.[12] Thus, the sale of alcoholic beverages with to-go food orders generally will not be subject to mixed beverage gross receipts tax and mixed beverage sales tax, but instead sales and use tax under Texas Tax Code, Chapter 151.[13]
So, Alcoholic Beverages Sold by Non-Permittees Aren’t Taxed?
No! Alcoholic beverages sold by folks who don’t hold a permit subject to mixed beverage taxes usually are going to be subject to plain-old sales or use tax under Texas Tax Code, Chapter 151.[14]
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[1] For those interested, which admittedly is probably only me, the mixed beverage gross receipts tax (then the only mixed beverage tax in the state and imposed at a rate of 14%), was administered originally by the Texas Alcoholic Beverage Commission (“TABC”). In 1993, the Legislature reassigned administration of the tax to the Texas Comptroller by enacting Chapter 183. See Acts 1993, 73rd Leg., ch. 934, Sec. 106. The idea being the Comptroller was already performing tax collection and auditing functions similar to what the TABC was then performing and was already auditing holders of alcohol permits and licenses for sales and use tax (more on that later), so moving administration of mixed beverage gross receipts tax to the Comptroller “would elimination duplication of effort, institute a more balanced auditing process and provide a more cost effective and convenient tax system.” House Research Organization, Bill Analysis for HB 1445 at 7 (May 6, 1993). The problem being that since splitting Chapter 183 off from the Texas Alcoholic Beverage Code, the Legislature sometimes forgets to incorporate changes made in the Texas Alcoholic Beverage Code in Chapter 183, and vice versa.
In 2013, the Legislature decided to reduce the mixed beverage gross receipts tax rate to 6.7% and create a new mixed beverage sales tax imposed at rate of 8.25%. Acts 2013, 83rd Leg., R.S., ch. 1403, Sec. 12. As we’ll discuss, mixed beverage gross receipts tax is a tax on permittees selling the mixed beverage and can’t be passed on to the consumer (although permittees presumably build the tax into the cost they charge to consumers), while mixed beverage sales tax is a tax ultimately imposed on the consumer. House Research Organization, Bill Analysis for HB 2572 at 2 (May 2, 2013). Separating out a mixed beverage sales tax from the mixed beverage gross receipts tax was intended to promote transparency, because consumers would know that mixed beverage sales tax applies to the stated cost on the receipt. Id.
[2] See Tex. Tax Code §§ 183.001(b)(1), 183.021, 183.041.
[3] See Tex. Tax Code § 183.001(b). Comptroller Rule 3.1001 provides a slightly different list of permits whose holders would be mixed beverage taxes:
- mixed beverage permit;
- mixed beverage late hours permit;
- mixed beverage permit holding a food and beverage certificate;
- daily temporary mixed beverage permit;
- private club registration permit;
- private club exemption certificate permit;
- private club late hours permit;
- daily temporary private club permit;
- private club registration permit holding a food and beverage certificate;
- caterer’s permit; or
- rectifier’s and distiller’s permit.
34 Tex. Admin. Code § 3.1001(a)(6).
[4] See Tex. Tax Code § 183.001(a); Tex. Alc. Bev. Code § 1.04(13). Under Chapter 183 (incorporating the Texas Alcoholic Beverage Code), a mixed beverage apparently does not include an alcoholic beverage sold by a holder of a distiller’s and rectifier’s permit. This results in a discrepancy between the list of permittees subject to mixed beverage taxes (which includes holders of a distiller’s and rectifier’s permit) and the definition of a mixed beverage (which does not include those holders), raising the question of a where holders of distiller’s and rectifier’s permits are even making sales of mixed beverages that are subject to tax.
Perhaps attempting to avoid potential discrepancies resulting from the Chapter 183’s reliance on the Texas Alcoholic Beverage Code, Rule 3.1001 defines a “mixed beverage” more broadly as “[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 a permittee.” Tex. Tax Code § 183.021.
[5] Id.; 34 Tex. Admin. Code § 3.1001(b).
[6] 34 Tex. Admin. Code § 3.1001(c)(1).
[7] 34 Tex. Admin. Code § 3.1001(a)(9), (f), (g), (h), (i).
[8] Tex. Tax Code § 183.0212(a)(1), (c); 34 Tex. Admin. Code § 3.1001(b)(3).
[9] Tex. Tax Code § 183.041; 34 Tex. Admin. Code § 3.1002(b).
[10] 34 Tex. Admin. Code § 3.1002(b), (c)(1).
[11] Acts 2021, 87th R.S., ch. 6.
[12] See Tex. Tax Code § 183.021, 183.041.
[13] See STAR Accession No. 202108009L (Aug. 2021).
[14] See Tex. Tax Code § 151.010, 151.051, 151.101, 151.308(a)(5).
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