Are admission charges to a small folk-music cafe taxable as cabaret charges when food sales are only a small part of the business?

Plain-English summary

Philip Ciganer, doing business as The Towne Crier Cafe, presents small folk-music concerts — a stage, sound booth, dressing room, and about 95 seats, with no dance floor — and also sells food and drink (cheese platters, salads, hummus, tandoori wings, noodles, soup, beer, wine). Food is 25% of gross receipts; admissions are 75%. He asked whether his admission charges are taxable as cabaret charges under Tax Law § 1105(f)(3).

The Department said no — the cafe is not a cabaret, so admissions are not taxed.

• The rule. A place furnishing a public performance for profit is a taxable "roof garden, cabaret or other similar place" (§ 1105(f)(3); definition in § 1101(d)(12), as amended retroactively by Chapter 609, Laws of 1986 and upheld in Epstein d/b/a My Father's Place v. State Tax Commission) — unless it merely offers live dramatic/musical performances and the serving or selling of food/refreshment is "merely incidental" to them.
• The test. Because the cabaret tax descends from the old federal excise tax (IRC § 4231), the Department applied the federal multi-factor analysis:
  • Share of receipts from food (the single most important factor): 25% — below the 27% found incidental in Geer, and well under the 45.1%–74.7% range courts found more than incidental.
  • Space devoted to dining: about 28% (the majority of the space is for the performance).
  • Food as an attraction in itself: the menu is distinctive, but there is no minimum food charge, no food served during performances, and only a self-service counter (no table service).
  • Nature and hours of entertainment: open only on concert evenings, with the concerts the sole draw; never open just to sell food.
• Conclusion. On the totality, food sales are merely incidental to the folk concerts, so the cafe is not a cabaret and its admission charges are not subject to sales tax under § 1105(f)(3). (Admissions to musical arts performances are also excepted under § 1105(f)(1).)

What this means for you

A music venue that also serves food isn't automatically a taxable "cabaret." New York's cabaret tax reaches places where food/drink is a real part of the draw. If your establishment mainly sells live music and food is a sideline, admissions can escape § 1105(f)(3).

The food-to-total receipts ratio is the biggest lever. Courts (and the Department) treat the percentage of receipts from food and refreshments as the single most important factor. Low twenties percent points strongly toward "merely incidental"; getting into the mid-40s and above points the other way.

Operational details reinforce it. No minimum food charge, no food service during the show, self-service instead of table service, and opening only on performance nights all support the conclusion that people come for the music, not the meal. Keep records of your receipt split and space allocation — they're the proof.

Common questions

Q: I run a small concert room that also sells snacks and drinks. Do I charge sales tax on tickets?
A: Not necessarily. If your food and refreshment sales are "merely incidental" to live musical performances, admissions aren't taxable as cabaret charges. The Department found a folk cafe with 25% food receipts and 28% dining space was not a cabaret.

Q: What's the most important factor?
A: The percentage of total receipts coming from food and refreshments. Around 25–27% has been treated as incidental; 45% and up has been treated as more than incidental.

Q: We have a full bar and table service with a food minimum — does that change things?
A: It can. A food minimum, service during performances, and food that's a draw in its own right push toward "cabaret" status and taxable admissions. The Towne Crier avoided that with self-service only, no minimum, and no food during shows.

Citations and references

Statute and case:

• Tax Law § 1105(f)(3) — imposes tax on the amount paid as charges of a roof garden, cabaret, or other similar place
• Tax Law § 1101(d)(12) (as amended by Chapter 609, Laws of 1986) — defines "roof garden, cabaret or other similar place" as one furnishing a public performance for profit, but not a place where merely live dramatic or musical performances are offered with food/refreshment/merchandise sales that are merely incidental to the performances
• Tax Law § 1105(f)(1) — taxes admission charges to places of amusement, excepting charges for admission to dramatic or musical arts performances
• Epstein d/b/a My Father's Place v. State Tax Commission, 132 A.D.2d 52 (1987) — upheld the retroactive application of the Chapter 609 amendment to the cabaret tax
• Federal cabaret-excise cases applied by analogy (IRC § 4231): Stevens v. United States, 302 F.2d 158; Ross v. Hayes, 337 F.2d 690; Geer v. Birmingham, 88 F. Supp. 189; Dance Town, U.S.A. v. United States, 319 F. Supp. 634; Roberto v. United States, 357 F. Supp. 862 — establishing the multi-factor "merely incidental" test

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_40s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-88 (40)S
Sales Tax
August 11, 1988

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S880120B

On January 20, 1988, a Petition for Advisory Opinion was received from Philip Ciganer d/b/a
The Towne Crier Cafe, RD #2, Box 140A, Dover Plains, New York 12522.
ISSUE
The issue raised is whether admission charges to Petitioner's cafe are subject to sales tax
imposed by section 1105(f)(3) of the Tax Law.
FACTS
Petitioner presents a series of small folk music concerts featuring music and performers from
throughout America and around the world. Petitioner's establishment is comprised of a stage, sound
booth, dressing room, and limited seating (approximately 95 persons). There is no dance floor.
Approximately 28% of the total area of Petitioner's establishment is devoted to kitchen space, a self­
service counter and dining facilities. Petitioner offers a variety of foods including cheese platters,
salads, hummos, tandoori chicken wings, szechwan noodles, pesto linguine, soup, beer and wine.
Petitioner's receipts from the sale of food and refreshments amount to 25% of his gross
receipts. Petitioner's receipts from admission charges constitute 75% of his gross receipts.
Petitioner's establishment is open only when performances are scheduled.
LAW
Section 1105(f)(1) of the Tax Law imposes sales tax on: "Any admission charge ... to or for
the use of any place of amusement in the State, except charges for admission to ... dramatic or
musical arts performances ..."
Section 1105(f)(3) of the Tax Law imposes a sales tax on: "The amount paid as charges of
a roof garden, cabaret or other similar place ..." Pursuant to Section 1101(d)(12) of the Tax Law as
amended by Chapter 609 of the Laws of 1986, the phrase "roof garden, cabaret or other similar
place" means:
... Any roof garden, cabaret or other similar place which furnishes a public
performance for profit, but not including a place where merely live dramatic or
musical arts performances are offered in conjunction with the serving or selling of
food, refreshment or merchandise, so long as such serving or selling of food,
refreshment or merchandise is merely incidental to such performances.
TP-9 (9\88)

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Thus, an establishment which provides public performances, musical entertainment or
dancing and, additionally, sells or serves food, refreshment or merchandise falls within the definition
of roof garden, cabaret or other similar place unless the serving or selling of food, refreshments or
merchandise is merely incidental to the performances, entertainment or dancing.
DISCUSSION
Initially, it is noted that the issue raised by Petitioner applies to the period March 1, 1984 to
August 31, 1984. The amendment to section 1101(d)(12) of the Tax Law, enacted by Chapter 609
of the Laws of 1986, is by the terms of Chapter 609 deemed to have been in full force and effect on
and after March first, nineteen hundred eighty-one, and applies to all assessments which have not
been finally and irrevocably fixed or to which the time to judicially appeal therefrom has not expired
on July 24, 1986. The retroactive application of this provision was challenged in the case of Epstein
d/b/a My Father's Place v. State Tax Commission, 132 A.D.2d 52 (1987). However, the court
determined that:
Retroactive legislation is not necessarily unconstitutional simply because it upsets
settled expectations or lays new liability for a past act. Here the amendment to the
cabaret tax reflects a sound and lawful legislative purpose, that of disambiguating and
expanding the tax. It is retroactive presumably because the Legislature assumed
enterprises like My Father's Place were already within the scope of the law prior to
its amendment.
Epstein d/b/a My Father's Place v. State Tax Commission, 132 A.D.2d at 55.
Inasmuch as Petitioner provides public performances for profit in conjunction with the
serving and selling of food and refreshments, Petitioner's establishment will fall within the definition
of "roof garden, cabaret or other similar place" unless it is demonstrated that its sale of food and
refreshments is merely incidental to such performances.
The tax imposed pursuant to section 1105(f)(3) of the Tax Law is derived from the former
federal excise tax on cabaret charges. IRC §4231. Thus, the numerous federal court decisions on
this topic provide considerable illumination in determining when the sale of food and refreshments
is merely incidental.
It must be recognized that there is no simple test to determine when the sale of food and
refreshments is merely incidental. Stevens v. United States, 302 F.2d 158, 164. Clearly, the amount
of receipts attributable to the sale of food and refreshments as a percentage of total receipts has been
viewed by the courts as the single most important factor in making this determination. Stevens v.
United States, supra.
In some situations, the percentage of receipts attributable to the sale of food and refreshments
may be so great or so small that this factor alone will be sufficient to determine whether such sales
are merely incidental. Ross v. Hayes, 337 F.2d 690, 692. In other situations, other factors must be
considered as well, including the amount of space devoted to the relevant activities, the nature and
extent of food and refreshment services and the nature and hours of entertainment.

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SOURCES OF INCOME
In determining whether the sale of food and refreshments is merely incidental, the courts have
consistently held that the percentage of receipts from the sale of food and refreshments is the single
most important factor. The courts have found the sale of food and refreshments to be more than
merely incidental when the percentage of receipts from such sales ranged from 45.1%, Dance Town,
U.S.A., Inc., v. United States, 319 F. Supp. 634 to 74.7%, Roberto v. United States, 357 F. Supp
862, aff'd 518 F.2d 1109. Conversely, in Geer v. Birmingham, 88 F. Supp 189, rev'd 185 F.2d 82,
the establishment's receipts from the sales of food and refreshments, which totaled 27%, were found
to be merely incidental.
It is noted that in the instant case, Petitioner's receipts from the sale of food and refreshments
amounts to a mere 25% of its total receipts, which amount is less than that of the establishment in
the Geer case. However, inasmuch as one-quarter of Petitioner's receipts are from the sale of food
and refreshments, it must be concluded that such receipts are not so low that this question may be
determined based upon this factor alone.
EXTENT OF DINING FACILITIES
The courts have consistently analyzed the facilities provided in an establishment to determine
whether the preparation and consumption of food and refreshments plays a significant role in the
operation of the establishment. Dance Town , U.S.A., Inc., v. United States, supra., Shutter v.
United States, 406 F.2d 906, Luna v. Campbell, 302 F.2d 166, Billen v. United States, 273 F.2d 667.
Thus, as the percentage of space devoted to the preparation and consumption of food and
refreshments (e.g. kitchen space, bars and tables and other areas suitable for dining) becomes greater
in comparison to the percentage of space devoted to entertainment activities (e.g. band space, dance
floors, stages and lighting facilities), it becomes more likely that the selling of food and refreshments
is more than merely incidental.
In the instant case, Petitioner's establishment consists of a stage with seating suitable for
viewing the performance on stage, dressing rooms, a kitchen with a self-service counter and a small
number of tables with chairs suitable for dining. No dance floor is available. The majority of
available space in Petitioner's establishment is devoted to activities other than the preparation and
consumption of food and refreshments. It is noted that approximately 28% of Petitioner's space is
devoted to the preparation and consumption of food and refreshments while in the Ross case, the
court found persuasive that less than 25% of the space at issue was devoted to such uses.
FOOD SERVICE
Where the sale of refreshments assumes importance as a significant attraction for its own
sake, it is not merely incidental. Stevens v. United States, 302 F.2d at 163. Thus, the selection of
foods and refreshments served, the method and extent of preparation of such foods and refreshments,

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the dining atmosphere created and extent of service available would all tend to indicate the extent
to which such foods and refreshments serve as an attraction in their own right. For example, in Ross
v. Hayes, 337 F.2d 690, the court concluded that the beer, Coca-Cola, Seven-Up, ice, potato chips,
pretzels, crackers, peanuts and chewing gum in question offered little or no attraction to the patrons
of the establishment and, therefore, were merely incidental to the real attraction which was the
dancing provided.
By way of contrast, the court noted in Dance Town, U.S.A., Inc. v. United States, supra. at
p. 636, that
Without food and drink, plaintiff's customers, exhausted by their terpsichorean
activities, may well not have lingered long upon the premises before seeking
elsewhere an oasis at which to refresh and refuel. Dancetown's bar was thus not only
an ample source of revenue in its own right, but a magnet that guaranteed the
presence throughout the evening of many of plaintiff's customers and, we might add,
kept them coming back.
In contrast to the Ross case, Petitioner serves such items as cheese platters, salads, hummos,
tandoori chicken wings, szechwan noodles, pesto linguine, soup, beer and wine. Such items
certainly are more likely to attract customers for their own sake due to the uniqueness of their
preparation than would the potato chips and pretzels of the Ross case. On the other hand, it is noted
that Petitioner does not charge a minimum food charge, serves no food or refreshments during
performances and provides only a self-service counter with no table service.
NATURE AND HOURS OF ENTERTAINMENT
Petitioner's establishment is known for the small folk music concerts which it presents. The
establishment is open only on evenings of performances. The performances are the only sources of
entertainment to the patrons; there is no dancing or other music available to entertain patrons.
Moreover, it is unlikely that people would frequent Petitioner's establishment just for the variety of
foods served because Petitioner is only open on evenings of performances and because food is served
only in between performances. Petitioner is never opened solely to sell food and refreshments. Thus,
the food and refreshments offered are clearly an adjunct to the concerts.
CONCLUSION
Based upon the totality of Petitioner's facts and circumstances, it is concluded that the selling
of food and refreshments by Petitioner is merely incidental to the presentation of folk music concerts
inasmuch as receipts from the sale of food and refreshments amount to only 25% of Petitioner's total
receipts; facilities devoted to the preparation and consumption of food make up only 28% of
Petitioner's facility and the sale of refreshments does not assume importance as a significant
attraction for its own sake. Additionally, Petitioner does not charge a minimum food charge, serves

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no food or refreshments during performances and provides only a self-service counter with no table
service; and Petitioner's establishment is open only on evenings of performances.
Accordingly, Petitioner's cafe is not a "roof garden, cabaret or other similar place "within the
meaning and intent of section 1105(f)(3) of the Tax Law and charges for admission to Petitioner's
cafe are not subject to sales tax under section 1105(f)(3) of the Tax Law.
Finally, it is noted that the Laws of 1986, Chapter 609, §2 establish transitional provisions
for the application of the tax here at issue if certain specified conditions are met. However,
inasmuch as such conditions are clearly not applicable to Petitioner's circumstance, such transitional
provisions do not apply to Petitioner.

DATED: August 11, 1988

FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.