Internal Revenue Service
Revenue Ruling
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smRev. Rul. 63-9
1963-1 C.B. 255
Caution: Obsoleted by Rev. Rul. 69-227
IRS Headnote
The issuance of books of tickets by certain race tracks to their regular patrons upon request, entitling them to admission to the tracks at a price below the published box office price, is a promotional device designed to encourage people to attend the races rather than the fixing of a lower regular or established price of admission. Therefore, the excise tax on sales of tickets by proprietors in excess of the regular or established price, imposed by section 4231(5) of the Internal Revenue Code of 1954, does not apply to the amounts paid for admission to the race tracks at the published box office price. Instead, only the excise tax on the amount paid for admission to certain race tracks, imposed by section 4231(2) of the Code, applies to the amounts actually paid for admission.
Full Text
Rev. Rul. 63-9
Advice has been requested whether the sale of tickets of admission in the manner described below operates to create a lower `regular or established' price of admission for purposes of the excise tax on sales of tickets by proprietors in excess of the regular or established price, imposed by section 4231(5) of the Internal Revenue Code of 1954.
To promote attendance at annual horse racing meets, certain race tracks issue books of tickets upon request. These tickets entitle the holders to admission to the tracks at a price below the published box office price. The books consist of a series of tickets which are numbered to correspond with the dates of races and which are bound under a cover. The covers are serially numbered and bear the names of the persons to whom issued. The reduced price of admission and the amount of the admissions tax are printed on each ticket. In many cases the number of persons admitted to these tracks at the reduced price exceeds the number of persons admitted at the published box office price. The track operators have not given public notice of a reduction of the published box office price and have not made refunds to those persons who paid the full price of admission.
Specifically, the question presented is whether the excise tax on sales of tickets of admission imposed under section 4231(5) of the Code applies to the sale of tickets at the published box office price, to the extent that the published box office price exceeds the reduced admission price. The tax would apply to that extent if the reduced admission price constitutes the `regular or established price' as that term is defined in section 101.10(a) of Regulations 43, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47.
Section 4231(2) of the Code imposes a tax of one cent for each five or major fraction thereof of the amount paid for admission to any place if the principal amusement or recreation offered with respect to such admission is horse or dog racing at a race track. The tax shall be paid by the person paying of such admission.
Section 4231(5) of the Code imposes a tax equivalent to 50 percent of the amount for which the proprietors, managers, or employees of any opera house, theater, or other place of amusement sell or dispose of tickets or cards of admission in excess of the regular or established price or charge therefor. The tax shall be returned and paid by the persons selling such tickets.
Section 101.10(a) of Regulations 43 provides as follows:
101.10 Regular or Established Price Defined.-(a) The `regular or established price' of admission to an attraction on a given occasion means the full price, fixed by the person in control, in force at the time of the first sale, of tickets or cards of admission thereto. However, the mere fact that a price is called an established price does not make it such. The established or regular price of admission may be the same for all admissions, or may vary in accordance with the accommodations furnished. Any scale of prices adopted in good faith, and reasonably corresponding to the kinds of accommodations furnished, will be accepted as showing the true established prices of admission. The established price of an admission need not be the same for different attractions or even for different performances of the same attraction; but when tickets are once put on sale for a particular performance the price of admission for every accommodation at that performance is thereby established. Established price of admission once so adopted are not affected by the mere sale of a few admissions at prices different from the ones so established. Established prices once adopted for any occasion may not be thereafter increased for that occasion. If tickets are subsequently sold at higher prices, the excess charges are taxable. Prices once established or adopted may be reduced, but in such case liability to excess-charge taxes with respect to all admissions sold at the original established prices can be avoided only by complying with the following conditions:
(1) Any reduction of an established price must apply equally to all admissions covered by such established prices; (2) the reduction must not result in setting a lower price for certain accommodations than is charged for other like accommodations on the same occasion; (3) public notice must be promptly given of the reduction and of the fact that every person having paid for admission at the former established price can secure a refund at any reasonable time of the amount he paid in excess of the new established price; (4) such refunds actually must be made promptly on request.
Presumably, it could be concluded from a reading of section 101.10(a) of the regulations that the reduced admission price in the instant case comes within the literal definition of `regular or established price' set forth in the section. However, the legislative history of section 4231(5) of the Code, since its inception as section 800(a)(4) of the Revenue Act of 1918, indicates that the Congress intended to impose this tax on a charge representing the difference between a regular or established price of a ticket of admission and a higher price improvised to take advantage of an unusual demand for tickets. The practice of improvising such higher prices is commonly referred to as `scalping.' Obviously, the ticket selling program described above cannot be characterized as `scalping.' It is a promotion program designed to encourage attendance at race meetings, and in effect it gives a discount to an individual who agrees to, or can reasonably be expected to, attend the races a certain number of times during the season.
Accordingly, it is held that the issuance of books of tickets by these race tracks to their regular patrons upon request, entitling them to admission to the tracks at a reduced price, is a promotional device designed to encourage people to attend the races rather than the fixing of a new regular or established price of admission, within the intent of section 4231(5) of the Code. Therefore, the excise tax on sales of tickets by proprietors in excess of the regular or established price, imposed by section 4231(5) of the Code, does not apply to the amounts paid for admission to these race tracks at the published box office price. Instead, under the circumstances described, only the excise tax on the amounts paid for admission to certain race tracks, imposed by section 4231(2) of the Code, applies to the amounts actually paid for admission.