Does a bar have to charge sales tax on its beer sales, or does the alcohol gross receipts tax cover it instead?

Plain-English summary

A tax preparer asked the Comptroller about a client who runs a small-town bar and also has vending machines selling chips and candy. The client had been collecting tax on his beer sales and paying tax to his own suppliers when he bought the beer, and wanted to know whether that was the right approach.

The Comptroller's answer turns on one fact: whether the bar holds a TABC (Texas Alcoholic Beverage Commission) mixed beverage permit. Without one, the bar must collect and report sales tax directly on its beer sales (as long as those sales aren't already being reported to TABC) and on the chips and candy sold through the vending machines. Because the bar is reselling those items to customers, it should give its own suppliers a resale certificate instead of paying tax on its wholesale purchases — the tax gets collected once, from the final customer. But if the bar sells mixed drinks and holds a mixed beverage permit, its beer sales fall instead under the alcohol gross receipts tax, which is reported and paid to TABC rather than through sales tax.

What this means for you

Bar and tavern owners

Check whether you hold a TABC mixed beverage permit before deciding how to handle tax on your beer sales. No permit means sales tax applies to beer (and any other retail item like snacks) sold to customers, and you should be buying that inventory tax-free from your suppliers with a resale certificate rather than paying tax twice. A mixed beverage permit shifts beer sales to the alcohol gross receipts tax administered by TABC instead.

Accountants and tax professionals

This letter is a reminder that Texas's mixed-beverage tax regime is a substitute for, not an addition to, sales tax on beer sold at a permitted mixed-beverage establishment — but only when the beverage permit is actually in place. A bar without one stays squarely inside the ordinary sales-and-resale-certificate framework.

Common questions

Q: My bar has no mixed beverage permit — do I owe sales tax on beer I sell?
A: Yes, as long as those sales aren't already being reported to TABC, you must collect and report sales tax on the beer sales.

Q: Should I pay sales tax when I buy beer from my supplier to resell at my bar?
A: No — issue your supplier a resale certificate instead, since you're reselling the beer to your customers and tax should be collected only at that final sale.

Q: What changes if I get a mixed beverage permit and sell mixed drinks?
A: Then your beer sales are subject to the alcohol gross receipts tax, reported and paid to the Texas Alcoholic Beverage Commission, rather than to sales tax.

Q: Does this apply to my bar too?
A: This letter is based on the specific facts presented and can be relied on for detrimental reliance purposes only by the taxpayer who requested it — other bars with different facts should confirm their own situation.

Citations and references

No specific Tax Code section or Comptroller rule number is quoted in this letter; it references only the general TABC mixed beverage permit and alcohol gross receipts tax framework.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9910806L

Original ruling text

October 20, 1999

"**"

Subject: Tax on Beer Sales

Dear **:

This is in response to your request for a ruling on the following fact
situation and questions:

We have a client who is collecting tax on beer sales in a small town bar, he
also has vending machines with chips and candy. He says he is paying tax to
the people he purchases his beer, etc. from, would this be correct? Also
should he charge tax?

Response: Your client must collect and report sales tax on the beer sales (if
these sales are not reported to TABC) and on the chips and candy sales. He
should issue his vendors a resale certificate on his purchases of beer, chips
and candy that he will sell at his bar.

However, if you client sells mixed drinks and has a mixed beverage permit, the
beer sales are subject to the alcohol gross receipts tax reported and paid to
the Alcohol Beverage commission (TABC).

Sales tax rules are available on the Internet at:

Enter 34 for the Title Number, 1 for the Part Number and the last three digits
of the Rule number, i.e., 322 for Rule 3.322, after Rule)

The State Tax Automated Research system may be accessed on the Internet at:

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Gilbert Zamora

Tax Policy