Potowomut Golf Club, Inc. v. Norberg, 73-292-M

• Court: United States State Supreme Court of Rhode Island
• Writing for the Court: KELLEHER
• Citation: 114 R.I. 589,337 A.2d 226
• Parties: POTOWOMUT GOLF CLUB, INC. v. John H. NORBERG, Tax Administrator. P.
• Docket Number: No. 73-292-M,73-292-M
• Decision Date: 09 May 1975

Page 226

337 A.2d 226 114 R.I. 589 POTOWOMUT GOLF CLUB, INC.
v.
John H. NORBERG, Tax Administrator. No. 73-292-M.P. Supreme Court of Rhode Island. May 9, 1975.

[114 R.I. 595] Rabinowitz & Zimmerman, Coleman B. Zimmerman, Providence, for petitioner.

Richard J. Israel, Atty. Gen., W. Slater Allen, Jr., Asst. Atty. Gen., Perry Shatkin, Chief Legal Officer (Taxation), Providence, for respondent.

OPINION

[114 R.I. 590] KELLEHER, Justice.

We have issued a writ of certiorari pursuant to the Administrative Procedures Act, G.L.1956 (1969 Reenactment) § 42-35-16. The petitioner, Potowomut Golf Club, Inc., is seeking our review of a Superior Court order which upheld the tax administrator's assessment of a deficiency as to certain sales tax due the state.

Potowomut Golf Club provides more than exercise for its members-it also serves food and liquor to them and their guests. It seems, however, that the members were more interested in the first eighteen holes than the proverbial nineteenth, because in 1966 the board of governors, which is charged with operating the club, was faced with an economic problem. Its members were not buying enough victuals and liquor refreshments to make the club's restaurant profitable. The board voted to raise the needed money by imposing a

Page 227

'* * * $15. per month minimum charge * * * (on) all Golf-playing members * * * this charge to be applied against food and liquor, not to include entrance fees to social events * * *.' In 1968, the resolution was amended so that the charge would be applied only against food purchases. Thus, if a member consumed at least $15 per month in foodstuffs, he would not incur any additional [114 R.I. 591] charges by the club, but if he consumed less, he would be assessed the difference between the amount of his comsumption and the $15 fee.

The club, recognizing that any sale of food to its members was subject to the 5 percent sales tax, G.L.1956 (1970 Reenactment) §§ 44-18-7 and 44-18-18, duly complied with all the taxing laws and paid the tax on its gross receipts realized from the actual sale of food. It did not pay any tax on the $15 fee or the remainder of such fee which reprfesented unconsumed food.

Upon an audit of the club's books, the tax administrator determined that any unused portion of the monthly minimum charge was also subject to the sales tax, and assessed the deficiency on the total amount of the unused portion of the $15 fees that remained in the food charge account. The club objects to this particular assessment, and the correctness of the administrator's decision is the sole issue before us.

Rhode Island imposes a tax on all retail sales at the rate of 5 percent of the gross receipts from such sales. Section 44-18-18. 'Gross receipts' comprise the total amount received in respect of the sale price of the retail sales of all retailers. Section 44-18-13.

Section 44-18-7 classifies nearly a dozen different transactions as sales. The two that are pertinent to this controversy are §§ 44-18-7, subd. C and 44-18-7, subd. D. Subsection C defines the following as a sale: 'The furnishing and distributing of tangible personal property for a consideration by social, athletic, and similar clubs and fraternal organizations to their members or others.' Subsection D defines a sale as: 'The furnishing, preparing, or serving for a consideration of food, meals, or drinks, including any cover, minimum, entertainment, or other charge in connection therewith.' The club takes the position that only an actual sale of food is taxable by virtue of § 44-18-7, subd. C. The tax administrator [114 R.I. 592] concentrates his...