Mailing Date: November 24, 2010

Telephone:
717-783-9454
FAX:
717-787-8820


Tony Gressley
VIA E-MAIL: tgressley@verizon.net
 

            RE: Charity Auction at a Licensed Establishment

 
Dear Mr. Gressley:
 
ISSUE:  Your October 27, 2010, e-mail asks if the licensed bar, of which you are the assistant manager, may host a benefit for a Pennsylvania non-profit organization.  It is anticipated that “Chinese” and “silent” auctions would be included in the activities designed to raise funds for the non-profit organization at this event.  You advise that the licensed establishment would receive no proceeds from the auctions or the cover charge for the event.  You further note that the licensed establishment would benefit only from its sales on the night of the event.  You have asked if such events are permissible, and if they are permissible, what guidelines must the licensee follow.
 
For purposes of this response, it will be assumed that a “Chinese auction” means an event in which tickets are sold to participants who may then “bid” as many tickets as they want, to participate in a chance drawing for a specific prize.  After “bidding” is closed, the winner of the prize is selected by a drawing of the tickets that were bid on that item.  Similarly, it will be assumed that a “silent auction” means an event in which participants list amounts they are willing to pay for a specific prize.  The prize then would be sold to the highest bidder.
 
OPINION:  Section 5.32 of the Board’s Regulations generally prohibits licensees from conducting events or contests at the licensed premises.  However, an exception permits licensees to hold self-sponsored events, tournaments or contests on their licensed premises; “self-sponsored” means that it is paid for and carried out by the licensee.  [40 Pa. Code § 5.32].  
 
Events, tournaments and contests that are sponsored by the licensee are subject to the following rules: there may not be any unlawful gambling directly or indirectly associated with the event, tournament, or contest; there may be no consumption of alcohol by participants as a part of the event, tournament or contest; the price of admission may not include a charge for or entitle the participant to receive an alcoholic beverage; the value of prizes awarded in any event, tournament or contest may not exceed five hundred dollars ($500.00), and the total of all prizes awarded in any seven (7)-day period may not exceed five thousand dollars ($5,000.00); finally, licensees must maintain records of prizes and winners on the licensed premises for two (2) years following the event, tournament or contest.  [40 Pa. Code § 5.32(f)(9)].  
 
A further exception permits licensees to allow charitable organizations to sponsor events upon the licensed premises, subject to the restrictions of section 5.32(d)(4) – (f) of the Board’s Regulations:
 
(4)       Hotel, restaurant, club, privately-owned public golf course, privately-owned private golf course, municipal golf course, brew pub or malt beverage eating place licensees may permit the conduct of tournaments and contests on the licensed premises for the benefit of, and officially sponsored by, bona fide charitable organizations.
(i)    A charitable organization for the purposes of this section is defined as one qualified, approved by and registered with the Department of State and operated under 49 Pa. Code Part I, Subpart B (relating to charitable organizations).
(ii)  Charitable organization functions shall be operated in accordance with the Solicitation of Funds for Charitable Purposes Act (10 P. S. §§ 162.1—162.24) and, if applicable, the Local Option Small Games of Chance Act (10 P. S. §§ 311—327), and the Bingo Law (10 P. S. §§ 301—308.1).
(5)       Hotel, restaurant, club, privately-owned public golf course, privately-owned private golf course, municipal golf course, brew pub and malt beverage eating place licensees may conduct self-sponsored tournaments, events or contests on their own licensed premises so long as the activities are in conformance with the applicable provisions of this subchapter.
(e)    For an activity conducted under this subchapter, the following apply:
(1)       There may not be lewd, immoral or improper conduct by the licensee, its servants, agents, employees, patrons or event, contest or tournament participants.
(2)       There may not be unlawful gambling directly or indirectly associated with an activity on the licensed premises. A licensee will be held strictly liable for unlawful gambling on the licensed premises.
(3)       There may not be an event, contest or tournament which involves the consumption of alcoholic beverages by an event, tournament or contest participant.
(4)       The price of a ticket or evidence of admission to an event, tournament or contest may not include a charge or assessment for alcoholic beverages or entitle the holder thereof to receive an alcoholic beverage anywhere on the licensed premises except for alcoholic beverages included in a meal package offering as provided for in Chapter 13 (relating to promotion).
(5)       A licensee or sponsoring charity may advertise an event, tournament or contest.
(6)       Hotel, restaurant, club, privately-owned public golf course, privately-owned private golf course, municipal golf course, brew pub and malt beverage eating place licensees, as well as governing bodies of professional golf, skiing, tennis, bowling, pocket billiards and nonlicensee sponsors as provided in subsection (e) may award prizes to contestants or participants of events, tournaments or contests.
(7)       The total value of all prizes for any given event, tournament or contest may not exceed $500. The total value of all prizes awarded in any 7-day period may not exceed $5,000.
(8)       Golf, skiing, tennis, pocket billiards or bowling events, tournaments, contests and events sanctioned by the State Athletic Commission are exempted from the prize value restrictions in this section.
(9)       Licensees shall maintain on the licensed premises for 2 years, from the date of the event, an itemized list of all prizes for each event, tournament, contest indicating each prize, its value and the name and address of the recipient.
(f)     The restrictions in this section apply not only to the licensee, but to partners, officers, directors, servants, agents and employees of a licensee.
 
[40 Pa. Code § 5.32(d)(4) – (f)].
 
If the “silent” auction is conducted as set forth earlier in this letter, it is unlikely that the “silent” auction would be considered unlawful gambling.  Because the “Chinese” auction involves a chance drawing, the possibility exists that it may be considered unlawful gambling, and would not be permissible on licensed premises.
 
Because unlawful gambling is a violation of the Pennsylvania Crimes Code, this office cannot provide you with a legal opinion as to whether the proposed Chinese auction would constitute unlawful gambling.  However, it should be noted that unlawful gambling consists of the following elements:  1) consideration or a fee or charge to play, 2) an element of chance, and 3) a prize or reward.  Pennsylvania Liquor Control Bd. v. Circus Bar, Inc., 506 A.2d 521 (Pa. Cmwlth. 1986).  It is recommended that you contact your local police, the Pennsylvania State Police or your County District Attorney for an official opinion concerning whether the specified event constitutes unlawful gambling.
 
Note also that some gambling activities, while unlawful generally, are considered to be lawful if conducted by an entity that holds a small games of chance permit.  You should contact your county treasurer or the Pennsylvania Department of Revenue, Miscellaneous Tax Division, at (717) 787-8275 to determine what activities would be permissible with such a permit.
 
THIS OPINION APPLIES ONLY TO THE FACTUAL SITUATION DESCRIBED HEREIN AND DOES NOT INSULATE THE LICENSEE OR OTHERS FROM CONSEQUENCES OF CONDUCT OCCURRING PRIOR TO ITS ISSUANCE.  THE PROPRIETY OF THE PROPOSED CONDUCT HAS BEEN ADDRESSED ONLY UNDER THE LIQUOR CODE AND REGULATIONS.  THE LAWS AND POLICIES ON WHICH THIS OPINION IS BASED ARE SUBJECT TO CHANGE BY THE LEGISLATURE OR THE PENNSYLVANIA LIQUOR CONTROL BOARD.
 
Very truly yours,
 
 
 
FAITH S. DIEHL
CHIEF COUNSEL
 
 
cc:       Jerry W. Waters, Director of Office of Regulatory Affairs
            Jane Melchior, Director, Bureau of Licensing
            Tisha Albert, Assistant Director, Bureau of Licensing
 
LCB Advisory Opinion No. 10-453

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