New York Advisory Opinion TSB-A-96(5)S: Is admission to a no-seating, no-food 1,000-capacity concert hall subject to New York's "cabaret" sales tax on admission charges, given that a cash bar accounts for roughly a third of the venue's revenue?

Plain-English summary

The law firm Hodgson, Russ, Andrews, Woods & Goodyear, LLP sought a ruling on behalf of a client that owns "The Music Hall," a venue with capacity for 1,000 people that will host only touring-musician concerts. Tickets (naming the performer, date, and time, valid for that show only) are sold through Ticketmaster in advance or at the box office, and no one is admitted without one; doors typically open around 8:00 p.m., an opening act plays 45 minutes starting around 9:00 p.m., a 30-minute intermission follows for stage setup, and the headliner performs until close to midnight. The Music Hall opens ONLY when a concert is scheduled -- closed the rest of the time, dark more than half of each calendar year, open 3-4 times a week only during the winter concert season. Physically, the venue has a stage, performer dressing rooms, two-level standing viewing areas (roughly 8,900 of the 15,000 total square feet), a front foyer, and a cash bar occupying a little under 10% of usable floor space; there's no seating (except occasional folding chairs when an elderly-heavy audience is expected) and no tables. Both alcoholic and non-alcoholic beverages are sold separately from admission with no minimum purchase, and there's no kitchen or food of any kind. Petitioner expects beverage sales to average 33.3% of total per-concert revenue, and advertisements for shows won't even mention that beverages are available.

The Department ruled The Music Hall is NOT a "roof garden, cabaret or other similar place" under Tax Law § 1101(d)(12), so its admission charges aren't taxed under § 1105(f)(3) -- and are separately exempt under § 1105(f)(1) as admission to a musical arts performance. Applying the same federal cabaret-tax case law New York borrows for this analysis, the Department walked through each factor: the 33.3% refreshment-revenue share is well below the 45.1%-74.7% range courts have found sufficient, standing alone, to defeat the "merely incidental" exception, so revenue percentage alone doesn't resolve the case here; the bar/refreshment area occupies less than 10% of the venue (compared to under 25% that one leading case found persuasive toward exemption); and there's no table service, no seating, no minimum drink charge, and no food at all -- all facts the case law treats as evidence that refreshments aren't functioning as an independent draw. The Department contrasted this with case law (Dance Town, U.S.A.) where a bar functioned as its own "magnet" keeping customers on premises independent of the entertainment; here, with no place to sit or relax and no food, it's unlikely patrons would frequent The Music Hall just for a drink. Combined with the venue opening only for scheduled concerts and closing promptly afterward, the Department concluded the sale of refreshments is genuinely incidental to the concerts, so the "roof garden, cabaret or other similar place" classification doesn't apply.

What this means for you

Concert venues, music halls, and nightclubs

Keeping refreshment revenue well under roughly 45% of total revenue, minimizing bar/food floor space (well under 25%), avoiding table service or fixed seating, skipping any drink minimum, and opening only for scheduled performances (not as a standalone bar/lounge) all strengthen the case that refreshment sales are merely incidental to a musical performance -- keeping admission charges outside the cabaret tax.

Venues weighing whether to add seating, food, or a drink minimum

Adding any of these features moves a venue further toward the "more than incidental" side of the line established in this and the companion TSB-A-96(9)S ruling, where table seating, waitress service, and a much higher bar-revenue share (78%) tipped a similar concert venue into taxable cabaret status.

Common questions

Q: Is 33.3% automatically safe and 78% automatically taxable?
A: There's no fixed bright line -- the ruling and its companion opinion both emphasize a multi-factor, totality-of-circumstances test where revenue percentage is the single most important factor but not the only one; the physical setup (seating, tables, food, minimum charges) can reinforce or undercut what the percentage alone suggests.

Q: Why does it matter that the venue's advertisements don't mention beverages?
A: It's evidence that the venue is being marketed and perceived as a concert venue, not a bar or nightclub with music -- reinforcing that patrons are drawn by the performance, not the refreshments, which supports the "merely incidental" conclusion.

Q: Does the presence of occasional folding chairs for elderly patrons undercut the "no seating" fact?
A: The ruling doesn't treat this occasional accommodation as changing the analysis -- the venue's default and predominant configuration remains standing-room with no fixed seating or tables, which is what the Department's reasoning relies on.

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) (tax on admission charges; dramatic/musical performance exception)
• Tax Law § 1105(f)(3) (tax on roof garden/cabaret charges)

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_5s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (5)S
Sales Tax
February 1, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950717B

On July 18, 1995, a Petition for Advisory Opinion was received from Hodgson, Russ,
Andrews, Woods & Goodyear, LLP, 1800 One M&T Plaza, Buffalo, NY 14203-2391.
The issue raised by Petitioner, Hodgson, Russ, Andrews, Woods & Goodyear, LLP, is
whether a venue owned by Petitioner's client, is a roof garden, cabaret or other similar place as
defined by section 1101(d)(12) of the Tax Law.
The venue ("The Music Hall") will host live musical performances, i.e., concerts. The
performers will be touring musicians. The 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 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 Music Hall will only open when a concert is scheduled. If there is no concert, The Music
Hall will be closed. The Music Hall's concert schedule will vary with the schedule of concert tours.
During the concert season (typically the winter months), The Music Hall will be open 3 to 4 times
a week. Off-season, The Music Hall will be open less often. Over the course of a calendar year, The
Music Hall will be "dark" over one-half of the time.
Physically, The 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 Music Hall, and no tables. The total
square footage of usable space in The 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, and 4,000 square feet in the balcony).

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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 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 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
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 Music Hall's total revenues for each concert will come from beverage sales.
When a concert date is confirmed, The 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 Music Hall will collect
and remit sales tax on all sales of beverages made on the premises.
Section 1101(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 1105(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."
Inasmuch as The Music Hall provides public performances for profit in conjunction with the
selling of refreshments, The 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.

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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 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 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.
In this case, The 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 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
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.

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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 Music Hall serves no food, does not require a minimum drink charge and does not
provide table service or seating for patrons.
The Music Hall is known for its ability to draw big name performers, i.e., for its concerts.
The concerts will be the only source of entertainment. The Music Hall will only be open on nights
when concerts are held. Over the course of a calendar year, The Music Hall will be "dark" more than
one-half of the time. The Music Hall will never open just to sell refreshments. When a concert is
scheduled, The 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 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 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 Music Hall's total revenues; facilities
devoted to the preparation and consumption of refreshments make up less than 10% of The Music
Hall's facility and the sale of refreshments does not assume importance as a significant attraction for
its own sake. Additionally, The Music Hall does not charge a minimum drink charge, provides no
table service or seating, and is open only on evenings of performances.

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Accordingly, The Music Hall is not a "roof garden, cabaret or other similar place" within the
meaning and intent of section 1101(d)(12) of the Tax Law and charges for admission to The 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: February 1, 1996

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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