Jack Majors, speaking for three members of the American Legion, asked the Dell Rapids City Council to refund a $100 special alcohol license fee after the group said it did not sell alcoholic beverages at a November soup supper and instead accepted a “free-will” donation for beer provided by TNC.

Claire, the city’s finance officer, told the council the South Dakota Department of Revenue interprets any exchange of money connected to alcohol — including a donation bucket — as a sale that requires the proper state license. Claire said the interpretation comes from the state’s special tax division and that the city enforces that interpretation unless it is challenged in court.

Council and staff also explained a city policy requiring special-event alcohol to be bought through licensed distributors. Claire said the policy was implemented about eight or nine years ago after events purchased alcohol out of town or out of state; requiring purchases through local distributors lets the city track local sales and prevents illegal out-of-state purchases. Dan Deats, who identified himself as a Johnson Brothers representative, told the council state law prohibits one licensed holder from buying alcoholic product from another license holder for resale, which helps explain why the city requires distributor purchases.

Majors and other Legion members said the requirement can be a practical problem. They reported difficulty in obtaining a state sales-tax license that some distributors require, and said buying from local vendors can end up more expensive after markups. Claire said the $100 application fee and whether the city can waive it would require additional review and that she would investigate whether refund or fee-waiver options exist and report back to the council in about a month.

Council members and staff agreed to work with the Legion and local distributors to clarify the state and local steps needed to allow the Legion and similar nonprofits to obtain product through licensed distributors or secure any required state exemption.

The finance officer and a Johnson Brothers representative said they would follow up with the Legion to try to resolve licensing and tax-exemption questions before the next council meeting.