Mutuality in members' clubs excludes sales tax on supplies to permanent members, but temporary members' transactions remain taxable.

Supplies of food, drinks and refreshments by an incorporated members' club to permanent members were held outside the sales tax net because mutuality and identity between the club and those members continued to exist; the relationship was treated as one of agency and recoupment, so no taxable sale arose and the club was not a dealer for those transactions. Supplies to temporary members were held taxable because their limited and restricted status did not create the reciprocal identity needed for mutuality; those transactions therefore fell within the sales tax provisions and made the club a dealer in respect of them. The club's liability was confined to dealings with temporary members.

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Issues: (i) Whether supplies of food, drinks and refreshments by an incorporated members' club to its permanent members amounted to a taxable sale and made the club a dealer under the sales tax laws; (ii) Whether the same supplies to temporary members were taxable and made the club a dealer in respect of those transactions.

Issue (i): Whether supplies of food, drinks and refreshments by an incorporated members' club to its permanent members amounted to a taxable sale and made the club a dealer under the sales tax laws.

Analysis: The club was held to be a genuine members' club in respect of its permanent members, with identity between the club and those members. The surplus from catering activity, if any, was treated as part of the club's overall funds and not as trading profit distributed to any outsider class. On those facts, the relationship in respect of supplies to permanent members was held to be one of agency and recoupment, so that the element of sale was absent. The constitutional amendment and the amended sales tax provisions did not displace that position for transactions where mutuality and identity continued to exist.

Conclusion: Supplies to permanent members were not taxable sales, and the club was not a dealer in respect of those transactions.

Issue (ii): Whether the same supplies to temporary members were taxable and made the club a dealer in respect of those transactions.

Analysis: Temporary members were subject to limited duration, restricted privileges, and no participation in management or in the club's assets. Their payments did not generate a reciprocal benefit for them over the period when their membership was inoperative, and the principle of mutuality could not operate in their favour. The court therefore held that the identity necessary to exclude sale was absent for transactions with temporary members, and the constitutional and statutory provisions governing sales of food and drinks applied to those supplies.

Conclusion: Supplies to temporary members were taxable sales, and the club was a dealer in respect of those transactions.

Final Conclusion: The club's liability was confined to its dealings with temporary members, while its supplies to permanent members remained outside the tax net.

Ratio Decidendi: In an incorporated members' club, supplies to permanent members are not taxable where mutuality and agency subsist, but supplies to a distinct class of temporary members without reciprocal identity and mutual benefit constitute taxable sales.

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