Wichita Club v. United States, 71-2665. Summary Calendar.

• Citation: 454 F.2d 135
• Decision Date: 19 January 1972
• Docket Number: No. 71-2665. Summary Calendar.,71-2665. Summary Calendar.
• Parties: WICHITA CLUB, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

454 F.2d 135 (1972)

WICHITA CLUB, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

No. 71-2665. Summary Calendar.^*

United States Court of Appeals, Fifth Circuit.

January 19, 1972.

Eldon B. Mahon, U. S. Atty., Dallas, Tex., Eugene G. Sayre, Atty., Tax Div., Dept. of Justice, Dallas, Tex., Fred B. Ugast, Acting Asst. Atty. Gen., Gilbert E. Andrews, Atty., Tax Div., Department of Justice, Washington, D. C., Martha Joe Stroud, Asst. U. S. Atty., Meyer Rothwacks, Elmer J. Kelsey, Richard Farber, Attys., Tax Division, Department of Justice, Washington, D. C., of counsel, for defendant-appellant.

Harold D. Rogers, Paul Eggers, Wichita Falls, Tex., Sherrill, Pace & Rogers, Wichita Falls, Tex., of counsel, for plaintiff-appellee.

Before GEWIN, GOLDBERG and DYER, Circuit Judges.

GEWIN, Circuit Judge:

The United States appeals from the judgment of the district court granting the Wichita Club a refund of excise taxes collected under Section 4241 of the Internal Revenue Code of 1954¹ during the taxable quarters ending September 30, 1963, through December 31, 1965. The district court held that the funds collected by voluntary assessment for the Club Liquor Pool and paid into the Liquor Pool Account were not subject to excise tax as membership dues or fees. We find that the court erroneously applied the relevant law to the facts which he found and reverse.

The Wichita Club was organized as a social club and provided its members with restaurant, bar, meeting room, and entertainment facilities. The members were assessed monthly dues on a federal excise tax included basis. During the relevant time period the Club sold alcoholic beverages to its members through a Liquor Pool which was funded by a voluntary $6.00 per month, per member assessment.² A portion of the Liquor Pool Assessment funds were put into a bank account designated "Liquor Pool Account" and used to purchase the alcoholic beverages put into drinks sold by the Club, and to pay state alcohol licensing fees. The Club made a "service" charge for each drink sold to cover overhead expenses in connection with the bar operation; no charge was made for the alcohol served in each drink. No member could purchase drinks containing alcohol unless the member had paid the Liquor Pool Assessment. All club members, except for three honorary members, paid the Liquor Pool Assessment.

The Club paid federal excise taxes on the portion of the Liquor Pool assessments which was not put into the Liquor Pool Account. In March, 1967, the Internal Revenue Service notified the Club that it owed additional excise taxes of $6,322.05 on the funds deposited by the Club in the Liquor Pool Account during the taxable period. The Club paid the additional taxes, was denied a refund, and then instituted this suit.

Following trial the court made findings that the club's members had the full use of the club's facilities irrespective of the payment of the Liquor Pool assessment and that the funds collected and the alcoholic beverages purchased were owned by the members of the club. The court concluded that the funds paid into the Liquor Pool Account did not represent an "assessment" or a charge for social privileges or facilities of the club and that those funds were not membership dues within the meaning of §§ 4241-42 of the Internal Revenue Code.

In construing the earlier acts³ imposing an excise tax on dues, the Supreme Court noted:

Consideration of the nature of club activity is a necessary preliminary to the formulation of a test of what constitutes a "due or membership fee." So far as finances go, the fundamental notion of club activity is that operating expenses are shared without insistence upon equivalence between the proportion of an individual\'s contributions and the proportion of the benefits he receives. Thus, on the one hand, payment of the price of an individual dinner at the club dining room or of a single round of golf lacks the element of making common cause inherent in the idea of club activity. But, on the other hand, payment for the right to repeated and general use of a common club facility for an appreciable period of time has that element and amounts to a "due or membership fee" if the payment is not fixed by each occasion of actual use.

White v. Winchester Country Club, 315 U.S. 32, 41, 62 S.Ct. 425, 430, 86 L.Ed. 619, 625-626 (1942). The Internal Revenue Code of 1954 expanded the definition of taxble "dues" to include:

". . . Any assessment, irrespective of the purpose for which made,

...