Rev. Ruling 59-188

Tax-free Alcohol

Advice has been requested whether a health clinic operated for the benefit of members of a union may secure tax-free alcohol for use in the treatment of its patients.

Section 5310(c) of the Internal Revenue Code of 1954 provides, in part, that alcohol may be withdrawn, free of tax, for the use of any clinic operated for charity and not for profit, including use in the compounding of bona fide medicines for treatment outside of such clinics of patients thereof, but not for sale.

A health clinic has been established for the care and treatment of members of a union. The facilities of such clinic are available only to members of the union and their families. Each active member must pay a stipulated fee each month entitling him to clinical care for himself and his family, and a charge is made for the drugs administered.

To be within the provisions of section 5310(c) of the Code relating to the use of alcohol, free of tax, in charitable clinics, the clinic must be operated not only without profit but entirely for charity. No charge of any nature may be exacted of or collected from patients of the clinic by reason of services rendered, and no fee may be charged for medicines compounded with tax-free alcohol except when such medicines are administered in the clinic and no profit is realized by the clinic form any patient as the result thereof or in any manner.

Since the member of the union contribute in part to the maintenance of the clinic, it does not qualify as a clinic operated for charity for purpose of using alcohol free of tax under the provisions of section 5310(c) of the Code.

26 U.S.C. 5310; 26 CFR 182.661 (27 CFR 213.105)