Rev. Rul. 71-131

The State Liquor Control Act of Montana, approved March 14, 1933 (Laws of Montana, 1933, Chapter 105, as amended by Chapter 57, Laws of the Extraordinary Session of 1933-34), provided for the creation of the Montana Liquor Control Board for the purpose of regulating the manufacture and sale of liquor.

The duties of the board are set forth in section 4-112 of the Revised Codes of Montana 1947, Annotated, as amended, as follows:

4-112. (2815.67) Functions, powers and duties of board. The board shall have the following functions, duties, and powers:

(a) To buy, import, and have in its possession for sale, and sell, liquors, in the manner set forth in this act;

(b) To control the possession, sale and delivery of liquors in accordance with the provisions of this act;

(c) To determine the municipalities within which state liquor stores shall be established throughout the state, and the situation of the stores within every such municipality;

(d) To lease, furnish and equip any building or land required for the operation of this act;

(e) To buy or lease all plant and equipment it may consider necessary and useful in carrying into effect the objects and purposes of this act;

(f) To appoint vendors and also every officer, inspector, clerk or other employee, required for the operation or carrying out of this act, and to dismiss the same, fix their salaries or remuneration, assign them their title, define their respective duties and powers, and to engage the service of experts and persons engaged in the practice of a profession, if deemed expedient;

(g) To determine the nature, form and capacity of all packages to be used for containing liquor kept or sold under this act; provided that all spirituous and vinous liquors shall be purchased and sold only in bottled containers in the original packages, and not in barrels or bulk, it being the intent and purpose of this act to prevent the rectification or dilution of such liquors;

(h) To grant and issue licenses under and in pursuance of this act;

(i) Without in any way limiting, or being limited by the foregoing, to do all such things as are deemed necessary or advisable by the board for the purpose of carrying into effect the provisions of this act, or the regulations made thereunder.

Section 4-229 of the Codes, as amended, provides for the disposition of money received from the sale of liquor at State liquor stores as follows:

4-229. (2815.154) Disposition of money received. All moneys received from the sale of liquor at the state liquor stores shall be deposited in the revolving fund in the state treasury to the credit of the board. The board is hereby authorized to purchase liquor from moneys deposited to its account in the revolving fund. The board shall transfer from its account in the revolving fund to its account in the earmarked revenue fund such moneys which are necessary to pay its administrative expense, subject to the limits imposed by legislative appropriation. No obligation created or incurred by the board shall ever be, or become, a debt or claim against the state of Montana, but shall be payable by the board solely from funds derived from the operation of state liquor stores. The board shall pay into the state treasury to the credit of the general fund the receipts from all taxes and licenses by it collected, and also the net proceeds from the operation of state liquor stores.

Held, income derived from the operation of liquor stores by the State of Montana is not subject to Federal income tax.

G.C.M. 14407, C.B. XIV-1, 103 (1935), is hereby superseded, since the position stated therein is set forth under the current statute and regulations in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.