Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 64-5

1964-1 C.B. 395

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

The admissions tax does not apply to that portion of the amount paid for a luncheon and fashion show which represents an amount paid to a hotel for the meal, if the cost of the meal is identified as a separate item on the tickets of admission to the affair. In determining the amount on which the admissions tax is based, the cost of meals served to nonpaying guests may not be prorated over the number of paid admissions. The tickets of admission to the affair should be printed to show separately (a) the cost of the meal (including tips, local taxes, and beverages served with the meal), (b) the admission price, (c) the Federal admissions tax, and (d) the total.

Full Text

Rev. Rul. 64-5

Advice has been requested as to the application of the Federal tax on admissions to amounts paid for the privilege of attending a private affair presented by an organization under the circumstances described below.

A fashion show is to be presented by an association of manufacturers of women's apparel for the purpose of displaying original creations of blouses and skirts to buyers and retailers. The affair is to be held in a hotel ballroom, and luncheon is to be served by the hotel prior to the fashion display. Only members of the association, buyers, and retailers may purchase tickets of admission. Certain persons have been invited on a complimentary nonpaying basis.

The association will charge $10 for each admission ticket plus whatever admissions tax is determined to be due. The association will pay $6 to the hotel for each meal served, including the meals served to the nonpaying guests. Because of the number of nonpaying guests attending, it is expected that the amount paid to the hotel by the association for all meals served will exceed the total amount received from the sale of tickets to paying guests.

The specific issues in the instant case are (1) whether the tax on admissions applies (a) to the total charge for each ticket to the affair or (b) to the total charge for the ticket less an amount attributable to the meal and (2) if an amount attributable to the meal may be excluded in determining the tax base, whether that amount may be determined by prorating to the tickets sold the total amount paid by the association to the hotel for all meals, including the meals of the nonpaying guests.

Section 4231(1) of the Internal Revenue Code of 1954 imposes a tax of one cent for each ten cents or major fraction thereof of the amount in excess of one dollar paid for a single admission to any place. The tax shall be paid by the person paying for the admission.

Section 4234(a) of the Code provides, in part, that the price (exclusive of the tax to be paid by the person paying for admission) at which every admission ticket or card is sold shall be conspicuously and indelibly printed, stamped, or written on the face or back of that part of the ticket which is to be taken up by the management of the theatre, opera, or other place of amusement.

Section 101.2 of Regulations 43, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the tax is imposed 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. The term `admission' means the right or privilege to enter into a place.

Section 101.4(a)(2) of the regulations provides that the tax applies whether any profit is contemplated or realized and whether the affair to which admission is charged is public or private.

The tax attaches to the amount paid for each admission separately. An amount which, in fact, is paid for the right or privilege to enter into a place is considered to be an amount paid for admission regardless of what it is called. On the other hand, an amount paid specifically for a meal is not considered to be a payment for the right or privilege to enter into a place. Thus, if the total charge for a ticket includes an amount paid for admission to a place and an amount paid for a meal, a reasonable allocation may be made on the ticket.

Accordingly, it is held that where a private affair, such as a fashion show, a dinner dance, or banquet with entertainment, is conducted in a hotel room, restaurant, ballroom, private dining room, or any other place, and the total amount paid by each individual to attend the affair includes an amount to be paid to the hotel, restaurant, caterer, or other person for a meal served, the actual cost of the meal may be excluded from the total amount paid to arrive at a base for the computation of the admissions tax on each admission. The actual cost of the meal may be considered to include tips, any local taxes, and the amount paid for such beverages as are served as part of the meal.

In the instant case, since the amount of $10 to be collected by the organization for each paying guest attending the luncheon and fashion show is $4 more than the actual cost of his meal, the amount of $4 constitutes an amount paid for each admission. Therefore, under the rates presently in effect, 30 cents admissions tax should be collected by the association on each ticket sold. The tickets of admission to the affair should be printed to show separately (a) the actual cost of the meal served (including specified gratuities, local taxes, if any, and beverages served with the meal), (b) the admission price, (c) the Federal admissions tax, and (d) the total.

In view of the foregoing, it follows that the amount attributable to meals for nonpaying guests is not considered in determining the tax base for each admission. It is immaterial that the amount paid by the association to the hotel for all meals served may exceed the proceeds from the sale of tickets to paying guests.