Is the fee to enter walk-through haunted funhouses an exempt charge to use a 'device,' or a taxable admission to a place of amusement?

Plain-English summary

The Petitioner runs an annual haunted attraction of roughly five funhouses inside one building. Patrons enter a free common area (snack counter, costumed performers, videos, a DJ), but must pay a fee to enter the funhouses (one fee admits them to all five). Inside, they walk a fixed route past mirrors, bridges, tunnels, sets and animation, and are "scared forward" by trained live actors and special effects. The Petitioner asked whether the fee is subject to sales tax.

The Office of Counsel held the funhouse charges are taxable admission charges under Tax Law 1105(f)(1):

• The tax. Section 1105(f)(1) taxes admission charges over ten cents "to or for the use of any place of amusement." A "place of amusement" is any place providing facilities for entertainment, amusement or sports (1101(d)(10)); an "admission charge" is the amount paid for admission (1101(d)(2)).
• Place vs. device. New York distinguishes a taxable charge to enter a place from a non-taxable charge to use a ride/device (Fairland Amusements -- separate ride tickets not taxable). Here the patrons pay to enter a defined physical space within a building, move through it mostly under their own locomotion, and the chief diversion is observation, not operating a device. That makes it a place of amusement.
• Live actors matter. Because the funhouses use trained live actors to move and scare patrons, the charge looks like a taxable admission (1605 Book Ctr. -- live performers make peep-show charges taxable). This also distinguishes an earlier opinion (TSB-A-07(5)S) where a funhouse with no actors, built on a trailer, was treated as a device.
• Labor Law label doesn't control. That the Department of Labor permits and inspects the funhouses as "amusement devices" for safety purposes does not decide the sales-tax question.

Result: the admission charges to the funhouses are subject to sales tax under 1105(f)(1).

What this means for you

Walk-through attractions (haunted houses, mazes, funhouses)

If customers pay to walk into and through a space -- and the experience is built around what they see and live performers around them -- you are almost certainly selling a taxable admission to a place of amusement, and you must collect sales tax.

"It's a device" is a hard argument when there are actors

The line that saved earlier funhouses (no live actors, portable ride-like structure) cuts the other way once you add trained live performers. Live human performance pushes toward a taxable admission.

A safety/permitting classification is not a tax ruling

Being permitted by the Department of Labor as an "amusement device" is about safety inspection, not sales tax. Don't rely on it to treat your admission as non-taxable.

Common questions

Q: We charge one fee to walk through our haunted house. Is it taxable?
A: Yes -- that is a taxable admission charge to a place of amusement under section 1105(f)(1).

Q: Our patrons "ride" through being pushed by air blasts and effects. Isn't that a device?
A: Not here. The patrons move mostly under their own locomotion through a physical space, and live actors run the experience -- that is a place of amusement, not an exempt ride/device.

Q: The state inspects us as an "amusement device." Doesn't that settle it?
A: No. A Department of Labor safety classification does not determine the sales-tax treatment.

Citations and references

• Tax Law section 1105(f)(1) (admission charges to a place of amusement)
• Tax Law section 1101(d)(2) (definition of admission charge)
• Tax Law section 1101(d)(10) (definition of place of amusement)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a14_29s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-14(29)S
Sales Tax
August 21, 2014

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S130814A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED.
Petitioner asks whether admission to its funhouses is subject to sales and use tax. We conclude
that the funhouses constitute places of amusement and that the admission charges are taxable
under Tax Law § 1105(f)(1).
Facts
Petitioner operates an annual haunted attraction (“the Attraction”), generally during the
months of September through early November. The Attraction is made up of roughly five
different funhouses that are all contained within the same building. Patrons enter the
Attraction’s common area without paying a fee. Once inside the common area, patrons will find
the following to entertain them while they wait: a snack counter, costumed performers, videos
(i.e., clips from scary movies, testimonials from other patrons, etc.) and music (a DJ may be on
hand during periods of high attendance). Individuals who do not wish to enter the funhouses can
wait in the common area. Though patrons can enter the common area for free, they must pay a
fee to access any of the funhouses. Patrons who pay the fee are granted access to all five
funhouses. Admission to the individual funhouses within the Attraction cannot be purchased
separately.
Once inside a funhouse, patrons move through the funhouse (often by running) along a
fixed route. Each funhouse has the same essential layout: an entrance, a direct path and an exit.
Within each funhouse, patrons find certain effects, such as: mirrors, suspension bridges, tilt
bridges, airbags, vortex tunnels, ramps, stairs, detailed sets, and animation. In all five funhouses,
patrons are “scared forward” by a combination of trained actors and special effects. For
example:
1. In one funhouse, there is a simulated ceiling drop, followed by a blast of CO2 behind
the patrons that propels them forward.
2. In another funhouse, an actor simulates gunfire behind the patrons in order to propel
them forward.
3. In another funhouse, patrons are forced forward by a vortex tunnel. The tunnel
contains a ramp where ten foot drums rotate around the patrons. This effect
disorients the patrons and forces them forward.

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4. Finally, three of the funhouses contain an “airbag” effect at the exit. The 32-foot
   airbag “squeezes” or propels patrons out of the funhouses’ exits—usually to the great
   amusement of the patrons in queue.
   The actual funhouses consist of module theatrical flats that are built off-site, transported
   in semi-trailers, and pieced together on-site. The sets are not permanently attached to the floor
   or ceiling. An independent electrical system is designed to sit on top of the flats away from
   actors and patrons. Each year, Petitioner has one month or less to erect the amusements within
   the space it rents. After the season is over, Petitioner generally has three weeks to take the
   funhouses down.
   The patrons’ time within each funhouse is limited to a matter of minutes. Patrons are not
   permitted to loiter within the attraction. Live actors working within each funhouse are tasked
   with the job of ensuring that the patrons continue along the fixed route until they reach the main
   exit of the funhouse. Because the Attraction’s funhouses are “haunted,” the live actors move
   patrons along the fixed route by scaring them. Even though patrons are not moved through the
   attraction by mechanical means (i.e., a conveyor belt or motorized cart), their time inside each
   funhouse is limited, as discussed above, because the live actors ensure that the patrons continue
   to move through the funhouse.
   The actors who work in Petitioner’s funhouses go through a thorough training program
   (“boo school”), endure hours of make-up and costume application, and take their jobs very
   seriously. Though the employees’ training includes scare tactics, engagement with patrons,
   emergency evacuation procedures, and medical emergency protocol, the most important topic
   taught in boo school is crowd control and flow. Petitioner instructs its employees to use scare
   tactics to move patrons through the attraction in a timely manner. If a patron is unruly or refuses
   to move forward, the employee is instructed to initiate the emergency procedure—the triggering
   of an emergency light located inside the funhouse. Once the emergency light is triggered,
   Petitioner’s management and security officers move in to assess the situation and, if necessary,
   remove the patron from the funhouse.
   Petitioner’s funhouses are registered as “amusement devices” under New York Law. The
   New York State Department of Labor’s Division of Safety and Health inspects Petitioner’s
   funhouses each year as part of the permitting process for amusement devices. There is a long list
   of steps that Petitioner must take in order to obtain the permits to operate the Attraction’s
   funhouses as amusement devices. These are the same steps that operators of amusement rides
   (e.g., roller coasters) must take to obtain permits.
   Analysis
   Section 1105(f)(1) imposes sales tax, as pertinent here, on “[a]ny admission charge where
   such admission charge is in excess of ten cents to or for the use of any place of amusement in the
   state….” Section 1101(d)(2) of the Tax Law defines “admission charge” as “[t]he amount paid
   for admission, including any service charge and any charge for entertainment or amusement or
   for the use of the facilities therefore.” Section 1101(d)(10) defines “place of amusement” as

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“[a]ny place where any facilities for entertainment, amusement, or sports are provided.” In
Fairland Amusements, Inc., v. State Tax Commission (110 AD2d 952, 953 [dissenting opinion of
Mikoll J), revd on dissenting opinion below, 66 NY2d 932 [1985]), the plaintiff company
provided portable amusement rides, such as Ferris wheels and merry-go-rounds, at fund-raising
events sponsored by various organizations. The company did not charge any admission to the
site where the rides were located; rather, the company sold tickets for individual rides. In
analyzing whether the § 1105(f)(1) tax applied to the ticket sales, the dissenting opinion of Judge
Mikoll distinguished between admission to “the physical space within which the amusement is
provided” and “the amusement facility itself.” 110 AD2d at 954. Judge Mikoll concluded that,
while the term was ambiguous, “place of amusement” referred only to admission to the former,
i.e., “the admission charge to enter the location where the amusement facilities are found.” The
Court of Appeals relied on the dissent at the Appellate Division to declare that the sale of tickets
for the use of the company’s rides were not subject to sales tax, 66 NY2d 932.
The Court of Appeals addressed the application of Tax Law § 1105(f)(1) again in 1605
Book Ctr., Inc. v. Tax Appeals Tribunal of State of N.Y. (83 NY2d 240, 246 [1994]), in which the
issue was the taxability of charges to view live peep shows. The Court held the charges taxable.
Focusing especially on the presence of a live performer, it stated that, “[t]o treat the charge as
one imposed for the use of a “device for amusement,” as appellant suggests, would contradict the
core reality of these human exchanges and taxable transactions.”
In this case, we conclude that Petitioner’s funhouse patrons were paying Petitioner to
enter “the physical space within which the amusement is provided,” rather than to use a ride,
inasmuch as the funhouses are a defined space within a building, the patrons move through the
funhouses mostly by their own locomotion, and the chief diversion is observation, rather than
manipulation of devices. See 1605 Book Ctr., supra; Fort William Henry Corp. v. State Tax
Comm'n, 52 AD2d 664, 665 (3d Dept. 1976)(charge for admission to museum where patrons
could view artifacts, exhibits, and the firing of weapons by appropriately dressed personnel
found to be taxable under Tax Law § 1105[f][1]); Matter of Wien v. Murphy, 28 AD2d 222, 225
(3d Dept 1972)(charge for admission to an observatory on Empire State Building is found to be a
place of amusement); cf. Bathrick Enterprises, Inc. v. Murphy, 27 AD2d 215, 216 (3d Dept
1967), aff'd, 23 NY2d 664 (1968)(coin-operated amusement devices, such as automatic
phonographs and bowling games, found to be facilities and not places of amusement and thus
charges to use them were not taxable under Tax Law § 1105[f][1]). Accordingly, Petitioner’s
charges for admission to the funhouses are taxable. See also TSB-A-10(11)S.
In contending that the admissions to its funhouses are not taxable, Petitioner emphasizes
that it employs actors in the funhouses who are trained to ensure that customers keep moving
through the funhouses and do not loiter. According to Petitioner, this makes its funhouses
similar to one of the funhouses in TSB-A-07(5)S that was found to be a device. To the contrary,
Petitioner’s use of actors makes its funhouses different than the funhouses at issue in TSB-A07(5)S, which did not feature actors. In light of the decisions in 1605 Book Center, and Fort
William Henry Corp., supra, the presence of actors in the funhouses militates in favor of treating
the charges to Petitioner’s funhouses as taxable admission charges. Moreover, the funhouses in

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that Advisory were all portable structures built on a semi-trailer platform, rather than spaces in a
building, as is the case here.
Petitioner also points out that the New York State Department of Labor classifies
Petitioner’s funhouses as “devices” for purposes of the Labor Law and subjects them to safety
inspections as a result. We do not find this fact persuasive in regard to the issue here: whether
the funhouses are places of amusement or whether, alternatively, they are more similar to rides
under the distinction made in Fairland Amusement, supra. See Matter of St. Joe Resources Co.
v. New York State Tax Commn., 132 AD2d 98, 103 (dissenting opn), revd on dissenting opn
below 72 NY2d 943 [1988] (“The Internal Revenue Code and Environmental Conservation Law
definitions of mining relied upon by the majority were conceived with vastly different goals in
mind than that of a sales and use tax assessment”.)
Accordingly, Petitioner’s charges for admission to its funhouses are subject to tax under
Tax Law § 1105(f)(1).

DATED: August 21, 2014

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
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