When could an exempt club buy restaurant meals tax-free for its meetings and programs?

Plain-English summary

An exempt club could buy meals tax-free when the purchase related to its exempt purpose, the club appeared as the customer on the invoice, the club paid the facility directly, and it gave the vendor a properly completed exemption certificate.

The same result could apply when a member only advanced the payment and the restaurant's bill was made out to the club, although the letter strongly encouraged payment by an organization check to avoid audit confusion. If an individual member bought the member's own meal, the purchase was taxable even if the club might reimburse it.

The letter did not decide every “other taxable item” without more facts. It gave a door prize as an example of an item on which the club had to pay tax.

Common questions

Could the club buy qualifying meals tax-free? Yes, with the club as customer and a proper exemption certificate.

What if a member temporarily advanced the payment? The exemption could still apply if the bill was made out to the club, but organization payment was recommended.

What if a member purchased the member's own meal? The meal was taxable, whether reimbursable or not.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0947F07

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 1, 1989

Dear ****:

Thank you for your recent letter inquiring whether the *
* of **** may issue an exemption certificate to private
clubs, restaurants, etc., where the Club conducts its business
meetings and educational programs.

Your specific questions are restated below with my response.

Question: How should the *** Club handle the sales
tax charged for meals and other taxable items when the Club
pays the facility's bill directly?

Response: The purchase, lease or rental of a taxable item
which relates to the purpose of your exempt organization is
exempt from tax when the Club is the customer as shown on
the invoice, pays the facility directly, and provides the
vendor an exemption certificate in the form prescribed by the
Comptroller. Thus, the Club may purchase the meals tax free
by issuing a properly completed exemption certificate to the
facility.

Regarding the "other taxable items," I need more specific
information before I can answer on these. An example of an
item the Club must pay tax on is a door prize.

Question: How should the **** handle the sales tax
charged for meals and other taxable items when the Club
reimburses its member for the member's payment of the
facility's bill?

Response: If the member is only temporarily paying for the
meal and the restaurant's bill is made out to the Club, then
the answer is the same as above. However, to avoid confusion
and any possible problems in an audit, I strongly encourage
you to us an organization check, rather than a member's
personal check or credit card, to pay the facility.

Again, I don't have enough information to answer on the
"other taxable items."

Copies of Rules 3.287 and 3.322 are enclosed for your reference.
I would like to add that when any individual member pays for
his/her own meal, this is taxable, whether reimbursable by the
club or not. In this case, the customer is the individual, not
the *** Club.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

If you have any questions or need more information, please call
me toll free at 1-800-252-5555, ext. 34697. The regular number is
512/463-4697. You may write me at Tax Correspondence, Comptroller
of Public Accounts.

Sincerely,
Sandi Skaggs
Tax Correspondence