Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 54-22

1954-1 C.B. 234

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

Tax on admissions imposed by section 1700(a) of the Internal Revenue Code applies to an amount paid for an exchange ticket when sold for an amount equal to the minimum admission charge, exclusive of tax, even though such ticket may be exchanged for higher priced accommodations for which an additional payment is necessary. If an exchange ticket is sold for a lesser amount than the minimum admission charge, exclusive of the tax, and admission cannot be gained except by payment of an additional charge, the amount paid for the exchange ticket is not subject to tax until or unless such ticket is exchanged for a ticket of admission, at which time the tax attaches to the total amount paid for the exchange ticket and the additional charge.

Full Text

Rev. Rul. 54-22

Advice is requested concerning the application of tax on admissions imposed by section 1700(a) of the Internal Revenue Code to amounts paid for exchange tickets.

In the instant case M Corporation, which produces and manages a traveling show engages organizations in communities where performances are scheduled to conduct advance sales of exchange tickets. The exchange tickets are sold for $1 each of which amount 50 cents is retained by the organization selling the ticket and the remaining 50 cents is turned over to the M Corporation. The exchange tickets are redeemable at the box office for general admission tickets for the show or may be applied toward the purchase of reserve seats.

Section 1700(a) of the Code imposes a tax on the amount paid for admission to any place and applies to the amount which must be paid in order to gain admission to a place and not to the admission itself.

It is held that where an exchange ticket is sold for an amount equal to the minimum admission charge, excluding the tax, the amount paid for such exchange ticket constitutes a payment for admission and the tax attaches at the time such payment is made, even though the ticket may be exchanged at the box office for higher priced accommodations for which an additional payment is necessary. On the other hand, if an exchange ticket is sold for a lesser amount than the minimum admission charge, excluding the tax, so that admission cannot be gained except by payment of an additional amount, the amount paid for the exchange ticket does not constitute an amount paid for admission and the tax does not apply thereto unless and until such ticket, together with the amount of the additional charge, is presented at the box office, at which time the tax attaches to the total amount paid for the exchange ticket and the additional charge.

Accordingly, since the tickets sold by the organizations engaged by the M Corporation may be exchanged for general admission tickets to the show without payment of an additional charge, the tax attaches at the time the payment of one dollar is made to the organizations by the purchasers of the exchange tickets. In the event such tickets are exchanged for higher priced accommodations the tax attaches to the additional amount paid at the time of payment at the box office.

Where an exchange ticket is sold under circumstances that a tax is due at the time of sale, the tax should be collected by the organization and remitted to the corporation who is actually liable for the collection and return of the tax to the Government.

The exemption from the collection of tax on admissions provided by section 1701 of the Code with respect to certain classes of organizations described therein, does not apply where, as in this case, all the proceeds do not inure exclusively to the benefit of such organizations.