Does a private club's liquor permit fee depend on its peak membership, or can it be prorated for members who joined partway through the year?

Texas AG Opinion JM-948: How Is a Private Club's Liquor Permit Fee Calculated?

Plain-English summary

Private clubs that serve alcohol in Texas pay the state a permit fee that scales with how many members they have. The bigger the club, the bigger the fee, on a sliding schedule. The question in this opinion was how to count the members. The Alcoholic Beverage Commission had a practice going back to 1962: rather than counting every member who belonged at any point during the year, it prorated each membership by the fraction of the year the person was actually a member. A member who joined halfway through the year counted as half a member, and so on. That produced a lower membership number, and therefore a lower fee.

The State Auditor's office pushed back, arguing that this proration practice was costing the state revenue it was legally owed, because the statute keys the fee to the highest number of members during the year, not to a discounted, prorated figure. The commission asked the Attorney General to settle whether it could keep doing what it had been doing.

The Attorney General sided with the auditor: the commission is not authorized to prorate.

The statute is direct. It says the permit fee "shall be based on the highest number of members in good standing during the year." That language has been in the private-club fee law since it was first adopted in 1961, and it does not leave room for cutting the count down based on how long each member belonged.

The commission's defense was mostly historical. Before 1977, the old Texas Liquor Control Act had proration provisions, and the commission argued those provisions authorized its practice and were only accidentally dropped when the law was recodified into the Alcoholic Beverage Code. The Attorney General was not persuaded. Even when those old proration provisions were on the books, they only allowed prorating the fee when a fee was collected for part of a year, tied to when a permit was issued. They never authorized prorating the membership count itself. So the commission's practice was never actually grounded in the law, and its long use did not fix that. The Attorney General noted that courts give weight to a long-standing agency interpretation only when the statute is genuinely doubtful, and this one was not.

The Attorney General did acknowledge the practical mess the statute creates. The fee has to be paid up front when the club applies or renews, but the "highest number of members during the year" cannot be known until the year is over, so the initial fee is really just an estimate. There is an amendment procedure to adjust it later, and the commission had also been using year-end audits, but the commission found these tools imperfect, and overpayments that land in the state's general revenue fund cannot be refunded without action by the legislature. None of that, though, made the statute ambiguous enough to justify reading "highest number of members" as if it said "prorated members."

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The private-club permit provisions of the Alcoholic Beverage Code, including the fee schedule in chapter 32 and the permit-year and payment rules, have been amended since 1988, and the dollar figures quoted here are the 1988 amounts. Anyone calculating a current private-club permit fee should consult the current Alcoholic Beverage Code and the commission's current rules rather than the 1988 provisions cited in this opinion.

Who this opinion affected (as of 1988)

The Texas Alcoholic Beverage Commission: The opinion told the commission to stop prorating membership and to base the fee on the highest number of members during the year.

Private clubs holding registration permits: The opinion meant their permit fees would be calculated on peak membership, which for many clubs is a higher figure than the prorated method produced.

The State Auditor's office: The opinion agreed with its position that proration was not authorized and was costing the state revenue.

Common questions

Can the Alcoholic Beverage Commission prorate a club's membership for the permit fee?
No. The Attorney General concluded the commission is not authorized to prorate. The fee must be based on the highest number of members in good standing during the year for which the fee is paid.

Why did the commission think it could prorate?
It relied on older proration provisions in the repealed Texas Liquor Control Act and on its own long-standing practice. The Attorney General found those old provisions only allowed prorating the fee tied to when a permit issued, never the membership count.

Does a long-standing agency practice get legal deference?
Only when the statute is of doubtful construction. Here the Attorney General found the highest-number-of-members language clear, so the commission's practice was not entitled to controlling weight.

Since the fee is paid in advance, how can it be based on the year's highest membership?
The up-front fee is necessarily an estimate. The code provides an amendment procedure, and the commission also used year-end audits, but overpayments deposited into general revenue cannot be refunded without legislative action.

Background and statutory framework

Section 32.02(b) of the Alcoholic Beverage Code provides that the private-club registration permit fee "shall be based on the highest number of members in good standing during the year for which the permit fee is to be paid," on a graduated schedule ranging from $750 for up to 250 members to $3 per member for clubs over 1,000. Subsection (c) directs that fees be deposited in the general revenue fund, and subsection (d) allows the permit holder to submit an amended application, with additional fee, no later than 90 days before the permit year expires.

The commission's proration practice was questioned by the State Auditor's office, which argued the fee should be based on the highest number of members, not a prorated figure, with proration causing a loss of revenue legally due the state. The commission defended proration on historical grounds. Before the 1977 codification, the Texas Liquor Control Act provided that private-club permits expired on the next August 31 after issuance (Penal Code arts. 666-13(a), 666-15e(6), repealed), and article 666-15(b) provided that where a fee was collected for a portion of a year, only the proportionate part of the fee would be collected, with article 666-15e requiring proration of private-club fees under that provision. In 1971, article 666-13(a) was amended so all permits expired one year from issuance (Acts 1971, 62d Leg., ch. 65), but the proration provisions were not repealed then. In 1977, the Texas Liquor Control Act was repealed and codified as the Alcoholic Beverage Code (Acts 1977, 65th Leg., ch. 194); the one-year expiration became section 11.09, but the proration provisions were omitted, with the revisor's note explaining that the 1971 amendment had made them obsolete. The commission argued that because the code was a non-substantive revision (Alco. Bev. Code section 1.01(a); Acts 1977, 65th Leg., ch. 194, section 7; Gov't Code section 323.007(b)), the omitted proration provisions were substantive and remained subsisting law, and that its long-standing practice, uncorrected by the legislature, supported its construction (Stephens County v. Hefner, 16 S.W.2d 804 (Tex. Comm'n App. 1929, opinion adopted)).

The Attorney General disagreed. The rule that a departmental construction adhered to over years of administering a statute will be given weight applies only to statutes of doubtful construction (McCallum v. Associated Retail Credit Men of Austin, 41 S.W.2d 45 (Tex. Comm'n App. 1931)), and the provisions had never supported the commission's proration of the membership count. The private-club permit provisions, first adopted in 1961 (Acts 1961, 57th Leg., ch. 262), based the fee on "the highest number of members in good standing during the year," substantially identical to current section 32.02. Even when the proration provision of repealed article 666-15(b) was in effect, it provided on its face only for proration of the fee where a fee was collected for a portion of a year; it had no application to the calculation of a club's membership. The commission's 1962 adoption of a membership-proration practice was unwarranted by any logical reading of the controlling provisions.

The Attorney General acknowledged the provisions are not all models of clarity: section 32.16 provides that a permittee may not allow its "average membership" to exceed that authorized by its permit, which seems anomalous next to section 32.02's "highest number of members," but section 32.16 is a separate standard operating with the cancellation and suspension provisions of section 32.17 (and the criminal penalties of section 1.05), not a fee measure. The fee provisions also create administrative difficulties: because the fee is payable in advance at application or renewal (section 11.35) while a permit expires one year after issuance (section 11.09), the fee based on the highest number of members during the year is necessarily an estimate; the subsection (d) amendment procedure only partly mitigates this, since membership can change afterward and the procedure led to frequent overpayments, and overpaid amounts deposited in general revenue cannot be reimbursed without legislative action (Tex. Const. art. VIII, section 6). The commission had relied instead on year-end audits, but had applied the proration method even there. Granting these difficulties, the Attorney General concluded the provisions are not ambiguous enough to justify construing the "highest number of members" requirement as authority to base the fee on a prorated membership figure, and that the commission is not authorized to prorate.

Citations

Statutory and constitutional authority:

• Section 32.02, Alcoholic Beverage Code (private-club permit fee based on the highest number of members)
• Section 32.16, Alcoholic Beverage Code ("average membership" limit; separate cancellation/suspension standard)
• Section 11.09, Alcoholic Beverage Code (permit expires one year after issuance)
• Section 11.35, Alcoholic Beverage Code (fee payable in advance at application or renewal)
• Section 1.01(a), Alcoholic Beverage Code (non-substantive revision)
• Section 323.007(b), Government Code (non-substantive codification)
• Article VIII, section 6, Texas Constitution (no refund of deposited revenue without appropriation)

Cases:

• Stephens County v. Hefner, 16 S.W.2d 804 (Tex. Comm'n App. 1929, opinion adopted) (Texas court; weight of long-standing agency construction)
• McCallum v. Associated Retail Credit Men of Austin, 41 S.W.2d 45 (Tex. Comm'n App. 1931) (Texas court; deference applies only to statutes of doubtful construction)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-948
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0948.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative. The page-1 header renders the opinion number as "JR-948"; the opinion is JM-948.

August 29, 1988

Honorable W. S. McBeath
Administrator
Texas Alcoholic Beverage Commission
P.O. Box 13127, Capitol Station
Austin, Texas 78711

Opinion No. JM-948

Re: Authority of the Alcoholic Beverage Commission to prorate club membership for purposes of determining permit fees for a private club registration permit (RQ-1432)

Dear Mr. McBeath:

Your request letter describes the long-standing practice of the Alcoholic Beverage Commission of "prorat[ing] each member's membership for that portion of the year during which he or she was a member" for purposes of calculating the permit fee due from private clubs issued permits under chapter 32 of the Alcoholic Beverage Code. You ask whether the Commission is "presently authorized or required to continue" this practice.

Section 32.02 of the Alcoholic Beverage Code provides in part:

(b) The permit fee shall be based on the highest number of members in good standing during the year for which the permit fee is to be paid according to the following rates:

0 to 250--$750
251 to 350--$1,050
351 to 450--$1,350
451 to 550--$1,650
551 to 650--$1,950
651 to 750--$2,250
751 to 850--$2,550
851 to 950--$2,850
951 to 1,000--$3,000
Over 1,000--$3 per member.

(c) All fees collected pursuant to this section shall be deposited in the general revenue fund.

(d) No later than 90 days before the expiration of the year for which the permit fee is paid, the permit holder may submit an amended application with as much additional fee as is required under the amended return. (Emphasis added.)

The commission's request as to the propriety of continuing its practice of prorating membership for determining permit fees was apparently prompted by arguments of persons in the State Auditor's office that permit fees should be based on the highest number of members during the year pursuant to subsection (b) of section 32.02, and not on a prorated membership figure, the latter method possibly resulting in a loss of revenue legally due to the state from the permitting process.

The commission in its request letter has advanced arguments in support of its continuing the proration of membership method of fee calculation, which arguments we summarize as follows:

Prior to 1971, and prior to the codification in 1977 of the Alcoholic Beverage Code, the Texas Liquor Control Act provided that permits of the sort issued to private clubs expired on the next August 31 following the dates of issuance. Penal Code art. 666-13(a), (repealed); art. 666-15e(6), (repealed). At that time, article 666-15(b) provided that if a fee was "collected for a portion of the year" . . . "only the proportionate part of the fee levied for such permit shall be collected." Also, article 666-15e, applying specifically to private club permits, required proration of private club permit fees pursuant to article 666-15(b).

In 1971, article 666-13(a) was amended to provide that all permits expired one year from the date of issuance. Acts 1971, 62d Leg., ch. 65, section 7, at 686. But the proration provisions of articles 666-15(b) and 666-15e, cited above, were not amended or repealed at that time.

In 1977, the provisions of the Texas Liquor Control Act were repealed and many of its provisions codified as the Alcoholic Beverage Code. Acts 1977, 65th Leg., ch. 194. The provision that all permits expire one year from the date of issuance became, at that time, section 11.09 of the Alcoholic Beverage Code. The proration provisions of former articles 666-15(b) and 666-15e were, however, omitted from the new code. The revisor's note, appearing after section 11.71 of the Alcoholic Beverage Code, states that the proration provisions were omitted in the code because the 1971 amendment providing that permits expire one year from the date of issuance made the proration provisions obsolete.

The commission argues that "since 1962, some nine years prior to the 1971 amendments and fifteen years before the codification of the Texas Alcoholic Beverage Code," it has followed the practice of prorating memberships for fee determination purposes. It argues, in effect, that the proration provisions, which were not repealed until 1977 with the adoption of the Alcoholic Beverage Code, have authorized its practice of prorating membership and that since those provisions were "substantive," their omission from the Alcoholic Beverage Code was due to an error of the revisors. In light of provisions in the code, in the act adopting it, and in the Government Code, to the effect that the Alcoholic Beverage Code was only a non-substantive revision of prior law, the commission argues, in effect, that the proration provisions, being substantive, constitute still subsisting law authorizing the commission's membership proration practice. See Alco. Bev. Code section 1.01(a); Acts 1977, 65th Leg., ch. 194, section 7, at 558; Gov't Code section 323.007(b). The commission also argues that the long-standing practice of the commission, based on its construction of the provisions discussed above, supports such construction, particularly in view of the non-intervention of the legislature over that time, citing, inter alia, Stephens County v. Hefner, 118 Tex. 397, 16 S.W.2d 804 (Tex. Comm'n App. 1929, opinion adopted).[1]

We disagree with the commission's position. "The rule that a departmental ruling adhered to through years of administering a statute will be given weight, only applies to statutes of doubtful construction." McCallum v. Associated Retail Credit Men of Austin, 41 S.W.2d 45 (Tex. Comm'n App. 1931). We do not find that the provisions governing calculation of club membership for purposes of assessing a permit fee have ever supported the construction placed on them by the commission in adopting its proration method of calculating the number of members, and thus, the amount due for the permit fee.

The provisions for issuance of private club permits were first adopted in 1961, and that legislation made the substantially identical provision, that calculation of the fee is based on "the highest number of members in good standing during the year," as is currently made in section 32.02 of the Alcoholic Beverage Code. Acts 1961, 57th Leg., ch. 262, section 1, at 560. We believe that even in 1961, when the proration provision of repealed article 666-15(b) was in effect, the proration provision had no applicability to the calculation of a club's membership. Article 666-15(b) on its face provided only for proration of the fee where a fee was collected for a portion of a year. We believe the commission's adoption of a practice in 1962 of prorating the membership was unwarranted by any logical reading of the controlling provisions, particularly since the provision which is now section 32.02 of the code has provided since its inception in 1961 that the fee "shall be based on the highest number of members."

We do concede that not all of the provisions of the Alcoholic Beverage Code are models of clarity. Section 32.16 provides, for example:

No private club registration permittee may allow its average membership to exceed that authorized by its permit. (Emphasis added.)

It would appear somewhat anomalous to have provided in section 32.02 that the permit fee is based on the highest number of members, but in section 32.16 that a permittee may not allow its average membership to exceed that authorized by the permit. However, section 32.16 is not applicable to the fee calculation under section 32.02. It appears, rather, to operate in conjunction with section 32.17, subsection (a)(5), which provides that a permit may be cancelled or suspended on a finding that the permittee club has violated any provision of the code. (See also section 1.05 of the code providing criminal penalties for a violation of a provision of the code.)

We also concede that the fee assessment provisions themselves present certain administrative difficulties for the commission. Subsection (b) of section 32.02 indicates on its face that "[t]he permit fee shall be based on the highest number of members in good standing during the year for which the permit fee is to be paid." A permit expires one year after the date it issued. Alco. Bev. Code section 11.09. However, since the fee is payable in advance at the time of the application for a permit or renewal permit (section 11.35), the calculation of the fee "based on the highest number of members . . . during the year for which the permit fee is to be paid" is necessarily only an estimate. Subsection (d) of section 32.02, providing for "amended applications" no later than ninety days before a permit's expiration, somewhat but not entirely mitigates the problem of assessing a fee based on the highest number of members during the year since the membership cannot be ascertained with certainty until the end of the year in question. The commission has informed us that it has found the subsection (d) amendment procedure insufficient for determining actual amounts due on permit fees under subsection (a), because the membership might change after submission of the amended application, and because the procedure led to frequent overpayment of fees. Amounts overpaid, once deposited in the general revenue fund, could not be reimbursed without legislative action. Tex. Const. art. VIII, section 6. Similar administrative problems exist under the present procedure.

The commission informs us that, instead of following the subsection (d) amendment procedure, it has relied on routine audits of licensees once accurate membership figures are available at the end of the permit year. However, the method of calculation used, even in such audits, for determining club membership for purposes of fee assessment has apparently been the membership proration method referred to above rather than one determining the highest number of members during the year pursuant to the language in subsection (b).[2]

But again, even granting that the fee assessment provisions present administrative difficulties, we do not believe that those provisions are or have been ambiguous such that the board was warranted in construing the requirement of section 32.02(b), that the fee "shall be based on the highest number of members," as authority to base the fee determination on a prorated membership figure.

SUMMARY

The Alcoholic Beverage Commission is not authorized to prorate private club membership for purposes of determining the permit fee under Alcoholic Beverage Code section 32.02. Under section 32.02, the permit fee is based on the highest number of members in good standing during the year for which the permit fee is to be paid, rather than on a prorated membership figure.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General

[1] The commission notes that separate substantive amendments to the Liquor Control Act in 1977 left the proration provisions unchanged. Acts 1977, 65th Leg., ch. 453.

[2] Please note that we do not address, because you do not raise, any issues with respect to the operation of the amendment procedure provided for in subsection (d) of section 32.02 or with respect to the commission's practice of determining additional fees due by use of a routine audit rather than the amendment procedure.