LBD-12 - Sales of Alcohol for Consumption on the Premises to Nonprofit and Government Entities

Generally, sellers of alcoholic beverages for consumption on the premises must collect and remit both liquor-by-the-drink (“LBD”) tax as well as sales tax on those sales.             

However, nonprofit and government entities are exempt from paying the sales tax on their purchases of tangible personal property. Therefore, a person who sells liquor directly to a nonprofit or government entity for its own consumption on the premises must collect and remit LBD tax on the sale, but the seller will not collect sales tax on the sale.

If the price on the menu includes both LBD and sales tax, the seller must reduce the sales price of a drink by the sales tax, otherwise, the seller is still collecting the tax and must remit it. For example, if a drink, including sales tax and LBD, is listed for $10 on the menu, the price to an exempt organization, assuming a 9.5% sales tax rate, is $9.24. (($10/1.245)*1.15) = $9.24.)

For more information, see Important Notice # 15-20.

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