New York Advisory Opinion TSB-A-96(28)S: Is a 1,000-capacity concert hall a taxable "cabaret" because it also sells drinks at a bar during shows, or is admission exempt as a musical performance because the drink sales are merely incidental to the concerts?

Plain-English summary

Horizontal Boogie Bar, Inc., doing business as The Water Street Music Hall in Rochester, hosts live concerts by touring musicians in a 1,000-person venue with roughly 15,000 square feet of usable space: a stage, dressing rooms, two levels of standing viewing area, a front foyer, and a bar along one wall (occasionally supplemented with folding chairs for shows expecting elderly patrons). Tickets, sold via Ticketmaster or at the door, name the specific performer and date and are the only way in. The venue only opens on concert nights -- staying dark more than half the calendar year -- and closes promptly after each show. There's a cash bar selling alcoholic and non-alcoholic drinks (no minimum charge required), no food of any kind, and no seating or tables anywhere in the venue; the bar and its immediate area take up less than 10% of total floor space, and beverage sales are expected to average 33.3% of total concert-night revenue. The venue asked whether it's a "roof garden, cabaret or other similar place" under Tax Law § 1101(d)(12) -- which would make its admission charges taxable under § 1105(f)(3) -- or whether its refreshment sales are merely incidental to the concerts, keeping admission exempt as a musical arts performance.

The Department applied the multi-factor test borrowed from decades of federal case law interpreting the old federal cabaret excise tax (the direct ancestor of New York's § 1105(f)(3)), since New York's cabaret provision derives from that federal statute. The single most important factor is the percentage of revenue from food/refreshment sales -- courts have found sales "more than merely incidental" in cases ranging from 45.1% to 74.7% of revenue, so Water Street Music Hall's 33.3% wasn't low enough to settle the question on that factor alone. But the other factors tipped the balance toward "merely incidental": the space devoted to refreshment preparation and consumption was under 10% of the venue's total area (courts have flagged even 25% as still supporting an incidental finding in a comparable case), and the drinks don't serve as their own draw -- there's no food, no drink minimum, no seating or table service encouraging patrons to linger, and the venue exists purely to host concerts (never opening just to sell drinks). Contrasting this with cases like Dance Town, U.S.A. (where a bar functioned as its own magnet keeping tired dancers on the premises), the Department concluded Water Street Music Hall's bar is simply an adjunct to the concerts, not an independent attraction. Because the refreshment sales are merely incidental under the totality of the facts, the venue is not a "cabaret" -- so its ticket charges aren't taxed under § 1105(f)(3), and they're also exempt from the general admission tax under § 1105(f)(1), which specifically excludes charges for dramatic or musical arts performances.

What this means for you

Concert venues and music halls that also sell food or drinks

No single number decides the "cabaret" question -- the percentage of revenue from refreshments matters most, but isn't dispositive in the 30-45% middle range; you'll also be judged on how much of your physical space is devoted to eating/drinking versus watching a performance, and whether your food/drink offering functions as its own draw (seating, table service, a kitchen, a drink minimum) rather than a quick, no-frills adjunct to the show. Venues without seating, without food, without a drink minimum, and that only open for scheduled performances have a much stronger case that refreshment sales are merely incidental.

Venue operators unsure whether to charge the cabaret tax on admission

Review your own revenue mix, floor-space allocation, and whether refreshments function as an independent attraction (per this multi-factor test) before deciding whether ticket sales need cabaret tax collected -- getting it wrong either way creates real exposure (undercollecting a tax that applies, or needlessly taxing exempt musical-performance admissions).

Common questions

Q: Is there a bright-line revenue percentage that decides whether refreshment sales are "incidental"?
A: No single number controls in the middle range. Courts have found sales NOT merely incidental (i.e., taxable) at percentages from 45.1% up to 74.7% of revenue, but haven't drawn a sharp line below that -- so a percentage like 33.3%, as here, requires looking at the other factors (space allocation, whether refreshments are their own attraction) rather than resolving the question by itself.

Q: Why does the amount of floor space devoted to food/drink matter?
A: Courts view a higher proportion of space dedicated to dining/drinking (kitchens, bars, tables) relative to entertainment space (stage, dance floor, lighting) as evidence the refreshment side of the business is a significant, independent part of the operation rather than incidental to a performance -- Water Street Music Hall's under-10% allocation (versus a 25% figure courts have still called incidental in another case) supported the incidental finding here.

Q: What made the beverage sales here "merely an adjunct" rather than their own attraction?
A: The absence of any food, no minimum drink purchase requirement, no seating or table service anywhere in the venue, and the fact that the venue is dark more than half the year and only opens specifically for scheduled concerts -- all signs that people come for the show, not to linger over drinks the way patrons might at a full bar/lounge.

Q: Does this mean any venue selling refreshments alongside music is automatically exempt from the cabaret tax?
A: No -- this is a facts-and-circumstances, multi-factor determination specific to Water Street Music Hall's setup. A venue with more revenue from food/drink, more space devoted to dining, seating and table service, or a drink minimum could easily be found to have more-than-incidental refreshment sales and thus qualify as a taxable cabaret.

Citations and references

Statutes and regulations:

• Tax Law § 1101(d)(12) (definition of roof garden, cabaret or other similar place)
• Tax Law § 1105(f)(1) (admission charge tax; musical/dramatic performance exemption)
• Tax Law § 1105(f)(3) (roof garden/cabaret charge tax)
• 26 U.S.C. § 4231 (former federal excise tax on cabaret charges, source of New York's cabaret tax)

Prior rulings and cases referenced:

• Stevens v. United States, 302 F.2d 158
• Ross v. Hayes, 337 F.2d 690
• Dance Town, U.S.A., Inc. v. United States, 319 F. Supp. 634
• Roberto v. United States, 357 F. Supp. 862, aff'd 518 F.2d 1109
• Shutter v. United States, 406 F.2d 906
• Luna v. Campbell, 302 F.2d 166
• Billen v. United States, 273 F.2d 667

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (28)S
Sales Tax
May 2, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960222A

On February 22, 1996, a Petition for Advisory Opinion was received from Horizontal Boogie
Bar, Inc. D/B/A The Water Street Music Hall, 204 North Water Street, Rochester, New York 14604.
The issue raised by Petitioner, Horizontal Boogie Bar, Inc. D/B/A The Water Street Music
Hall, is whether a venue owned by Petitioner, is a roof garden, cabaret or other similar place as
defined by section l101(d)(12) of the Tax Law.
The venue ("The Water Street Music Hall") will host live musical performances, i.e.,
concerts. The performers will be touring musicians. The Water Street Music Hall has a capacity of
1,000 persons.
Concert tickets will be sold in advance, at the box office on the night of the show, or both.
Advance tickets will be sold through "Ticketmaster". Tickets will name the performer and the date
and time of the concert and will only be valid for that concert. No one will be admitted without a
ticket.
The doors will open roughly one hour before the concert starts, or around 8:00 p.m. Given
the size of The Water Street Music Hall, it is expected that it will take roughly an hour for the 1,000
ticket holders to pass through the doors in an orderly manner. The opening act will take the stage
around 9:00 p.m. and perform for 45 minutes. The opening act will be followed by a 30-minute
intermission to set up the stage for the headliner, and the headliner will then take the stage. The
headliner will perform until close to midnight. Once the concert is over, the lights will be turned on,
the clean-up crew will begin work, and the patrons will begin filing out.
The Water Street Music Hall will only open when a concert is scheduled. If there is no
concert, The Water Street Music Hall will be closed. The Water Street Music Hall's concert schedule
will vary with the schedule of concert tours. During the concert season (typically the winter months),
The Water Street Music Hall will be open 3 to 4 times a week. Off-season, The Water Street Music
Hall will be open less often. Over the course of a calendar year, The Water Street Music Hall will
be "dark" over one-half of the time.
Physically, The Water Street Music Hall consists of a stage, dressing rooms, viewing areas,
a front foyer, and a bar located along one wall. There is no seating in The Water Street Music Hall,
and no tables. The total square footage of usable space in The Water Street Music Hall is roughly
15,000 square feet. The viewing areas are in two levels: stage-level, and a balcony. Collectively, the
viewing areas account for roughly 8,900 square feet (4,900 square feet at stage level,

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and 4,000 square feet in the balcony). The stage area takes up roughly 1,750 square feet. Dressing
rooms for performers (with private bathroom) take up 400 square feet. The front entrance room and
bathrooms take up 2,500 square feet. The balance, or 1,450 square feet, consists of the bar and bar
area.
When the concert given is of the kind where elderly clientele can be expected in large
numbers, The Water Street Music Hall will place roughly 250 folding chairs in rows auditorium style
(with a center aisle) in the main viewing area to accommodate people who cannot stand for an entire
concert.
The bar is located along one wall. The aisle behind the bar and the bar itself take up roughly
725 square feet. In front of the bar, there is an eight foot area making up an additional 725 square
feet (the "bar area"). The bar area is delineated from the viewing areas by a series of wall-to-ceiling
posts joined together by a waist-height railing. All told, the bar and bar area will make up a little less
than 10% of the usable floor space at The Water Street Music Hall.
Refreshments are sold separately from the concert ticket, i.e., it will be a cash bar. Both
alcoholic and non-alcoholic beverages will be available. No "drink minimum" will be imposed. The
Water Street Music Hall has no kitchen and no food of any kind will be available. It is expected that,
on average, one third (33.3%) of The Water Street Music Hall's total revenues for each concert will
come from beverage sales.
When a concert date is confirmed, The Water Street Music Hall will place advertisements
in local newspapers soliciting ticket sales. The name of the performer will be prominently displayed.
The advertisements will not indicate that beverages will be available for sale. The Water Street
Music Hall will collect and remit sales tax on all sales of beverages made on the premises.
Section l101(d)(12) of the Tax Law defines a "roof garden, cabaret or other similar place"
as follows:
(12) Roof garden, cabaret or other similar place. 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.
Section l105(f)(1) of the Tax Law imposes sales tax upon "[A]ny 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 upon" [T]he amount paid as charges
of a roof garden, cabaret or other similar place in the state."

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Inasmuch as The Water Street Music Hall provides public performances for profit in
conjunction with the selling of refreshments, The Water Street Music Hall will fall within the
definition of "roof garden, cabaret or other similar place" unless it is demonstrated that its sale of
refreshments is merely incidental to the 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.
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.
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.
In the instant case, The Water Street Music Hall's expected revenues from the sale of
refreshments will amount to 33.3% of its total revenues. Inasmuch as one-third of The Water Street
Music Hall's revenues are from the sale of refreshments, the amount of these revenues is not low
enough so that taxability may be determined based upon this factor alone.
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.
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
floor, stages and lighting facilities), it becomes more likely that the selling of food and refreshments
is more than merely incidental.

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In this case, The Water Street Music Hall consists of a stage, dressing rooms, viewing areas,
a front foyer, and a bar along one wall. There is no seating in the Water Street Music Hall and no
tables for patrons to sit. The area Petitioner has reserved for the preparation of refreshments amounts
to less than 10% of the Water Street Music Hall's total area, while in the Ross case, the court found
persuasive that less than 25% of the space at issue was devoted to these uses.
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. The selection of foods
and refreshments served, the method and extent of preparation of such foods and refreshments, 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, soft drinks, 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.
The Water Street Music Hall serves no food, does not require a minimum drink charge and
does not provide table service or seating for patrons.
The Water Street Music Hall is known for its ability to draw big name performers for its
concerts. The concerts will be the only source of entertainment. The Water Street Music Hall will
only be open on nights when concerts are held. Over the course of a calendar year, The Water Street
Music Hall will be "dark" more than one-half of the time. The Water Street Music Hall will never
open just to sell refreshments. When a concert is scheduled, The Water Street Music Hall will open
only as far in advance of the concert to allow all patrons in the door and will close promptly after the
concert is finished. Since there is no place to sit and relax, it is unlikely that people will frequent The
Water Street Music Hall just to have a drink. People will certainly not be coming to eat since there
is no food. The beverages served are an adjunct to the concerts.
Under all of the facts and circumstances presented, the selling of refreshments by The Water
Street Music Hall is merely incidental to the presentation of concerts inasmuch as the average
expected receipts from the sale of refreshments will amount to only 33.3% of the Water Street Music

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Hall's total revenues; facilities devoted to the preparation and consumption of refreshments make
up less than 10% of The Water Street Music Hall's facility and the sale of refreshments does not
assume importance as a significant attraction for its own sake. Additionally, The Water Street Music
Hall does not charge a minimum drink charge, provides no table service or seating, and is open only
on evenings of performances.
Accordingly, The Water Street Music Hall is not a "roof garden, cabaret or other similar
place" within the meaning and intent of section l101(d)(12) of the Tax Law and charges for
admission to The Water Street Music Hall are not subject to sales tax under section 1105 (f)(3) of
the Tax Law. Further, the tax imposed by section 1105 (f)(1) of the Tax Law does not apply to these
charges since they are charges for admission to musical arts performances.

DATED: May 2, 1996

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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