How were a music manager's band-booking fees and client payments to the bands taxed?

Note -- revoked historical guidance. DRS states that this ruling was revoked by Policy Statement (PS) 93(3).

Plain-English summary

Company X managed eight musical groups, booked their work, and told musicians when and where to perform and what music format to use. DRS treated Company X as an employment agency procuring jobs for the groups.

Under that classification, Company X had to charge tax on its booking fees whether the client or the band paid them. Payments made directly by third-party clients to the bands were not taxable.

The answer broadened if the musicians were Company X employees. In that event, the brokerage or management work was personnel services, and total gross receipts -- including fees clients paid to the bands -- were taxable. DRS said the cited statutory exemptions did not apply.

What this means for you

The historical ruling made the worker relationship decisive. Independent-band treatment limited tax to Company X's booking fees; employee treatment brought all personnel-service receipts into the tax base. PS 93(3) later revoked the guidance.

Common questions

Were Company X's booking fees taxable? Yes under the ruling, regardless of whether clients or bands paid them.

Were direct client payments to independent bands taxable? No under the stated employment-agency analysis.

What changed if the musicians were Company X employees? The entire personnel-service gross receipts became taxable, including client payments to the bands.

Citations and references

• Conn. Agencies Regs. § 12-426-27(b)(3), as quoted and applied in the ruling.
• Conn. Gen. Stat. § 12-412(62), whose exemptions DRS said did not apply.
• Policy Statement (PS) 93(3) -- identified by DRS as revoking this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-253

Original ruling text

Ruling 89-253, Personnel Services

This Ruling has been revoked by PS 93(3)

According to the information presented in your letters, Company X manages eight musical entertainment groups whereby it books and instructs musicians as to when and where their services will be rendered and what music format will be performed. Company X is owned by three shareholders. Each shareholder manages and participates in one musical group while the remaining five musical groups do not contain a shareholder participant.

Conn. Agencies Regs. §12-426-27(b)(3) provides as follows:

Employment services mean and include the procurement or offer to procure for a consideration: Jobs or positions for those seeking employment; or employees for employers seeking the services of employees.

Based on the available set of facts, Company X procures jobs for eight musical groups, inclusive of three bands with one shareholder participant. Company X operates an employment agency pursuant to Conn. Agencies Regs. § 12-426-27. Company X must apply tax to its fees for booking the bands whether it charges the clients or the bands. However, payments received directly by the bands from the third party clients are not subject to the sales and use tax.

In the event that the musicians are employees of Company X, the music broker or management services provided by Company X are considered to be personnel services pursuant to Conn. Agencies Regs. § 12-426-27(b)(3). The total gross receipts, inclusive of fees paid by the clients to the bands, are subject to the sales and use tax. The exemptions pursuant to Conn. Gen. Stat. § 12-412(62) do not apply.

LEGAL DIVISION

December 6, 1989