New York Advisory Opinion TSB-A-96(9)S: Is admission to a converted concert-hall venue -- where bar sales make up 78% of total receipts even though the main draw is live music -- subject to New York's "cabaret" sales tax on admission charges?

Plain-English summary

Empire Management and Productions, Inc. intends to own and operate an establishment dating to 1912 that has hosted live shows since 1980: it sells alcoholic beverages from its bar, charges a fee for patrons to listen and dance to a local band Petitioner books, and occasionally books national touring musical groups for ticketed concerts (traditional dancing to the concert music is neither encouraged nor prevented). The venue was converted to include table seating and a bar on one level of the theater, though the original stage and period mementos remain. The bar is only open on nights with concerts or the recently promoted DJ dance nights; drinks are served table-side by waitresses or at the bar. Of the establishment's total receipts, 22% come from admission charges and 78% come from bar sales.

The Department ruled the admission charges are taxable. Tax Law § 1105(f)(1) generally exempts admission to dramatic or musical arts performances from the state's general amusement-admission tax, but § 1105(f)(3) separately taxes admission to a "roof garden, cabaret or other similar place" -- a venue that furnishes public performances for profit -- UNLESS the sale of food or refreshment is merely incidental to those performances (§ 1101(d)(12)). New York borrows this "merely incidental" test from the former federal cabaret excise tax and its body of case law, which treats the percentage of receipts from food/refreshment sales as the single most important factor, alongside the amount of space devoted to dining versus entertainment, the extent and nature of food/drink service, and the hours/nature of the entertainment itself. Here, the 78% bar-revenue share exceeds every percentage (from 45.1% to 74.7%) that federal courts have found sufficient to defeat the incidental exception in prior cases; the venue's dedicated table seating, waitress service, and full bar (deliberately opened on performance nights) further show the drinks function as a real draw of their own, not an afterthought to the music. Weighing the totality of these facts, the Department concluded Petitioner's establishment is a "roof garden, cabaret or other similar place" within § 1101(d)(12), so its admission charges are taxable under § 1105(f)(3).

What this means for you

Concert venues, music halls, and nightclubs

If your bar/drink sales make up a large share (well above the roughly 45%-75% range courts have treated as pivotal) of your total revenue, expect your admission charges to be taxed as a cabaret charge rather than exempt as admission to a dramatic/musical performance -- regardless of how central the live music genuinely is to your business. Dedicated food/drink service infrastructure (table seating, waitress service, a full bar) strengthens the case for taxability.

Venues seeking to preserve the musical-performance admission exemption

To stay closer to the "merely incidental" side of the line, keep food/beverage revenue and dedicated service infrastructure to a clearly secondary role relative to ticketed performance revenue -- this and its companion ruling (a lower-drink-percentage concert hall found NOT to be a cabaret) show the analysis is fact-intensive and revenue-mix-driven.

Common questions

Q: Is there a bright-line percentage above which bar sales are automatically "more than incidental"?
A: No -- the ruling notes courts have found sales as low as 45.1% sufficient to defeat the incidental exception in some cases, so there's no fixed threshold; it's a totality-of-circumstances test where the percentage is the single most important, but not the only, factor.

Q: Does it matter that dancing (not just drinking) is also part of the draw?
A: The ruling doesn't treat dancing itself as decisive -- it focuses on whether the SALE OF FOOD/DRINK is merely incidental to the performance, and found the bar's dominant revenue share and dedicated service format weighed against the incidental characterization regardless of any dance-floor use.

Q: How does this compare to a case where a concert hall's bar sales were found to be merely incidental?
A: A companion 1996 opinion involving a different concert hall (with lower bar-revenue share, no seating, no food/drink minimum, less floor space devoted to the bar, and darker programming more than half the year) reached the opposite conclusion under the same multi-factor test -- illustrating how outcome-determinative the specific revenue mix and physical setup are.

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_9s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (9)S
Sales Tax
February 22, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950125A

On January 25, 1995, a Petition for Advisory Opinion was received from Empire
Management and Productions, Inc, 6 Crannell Street, Poughkeepsie, New York 12601.
The issue raised by Petitioner, Empire Management and Productions, Inc., is whether the
charges for admission to Petitioner's establishment to listen and/or dance to a live band are subject
to the sales tax.
Petitioner had originally raised an additional issue of whether it is liable for any sales tax due
on the charges if it engages a professional booking agent to collect them from patrons.
Subsequently, Petitioner stated that it is no longer using a booking agent. This additional issue,
therefore, is not addressed by this Advisory Opinion.
According to its submission, Petitioner intends to own and operate an establishment which
engages in the following activities:
1) selling alcoholic beverages from its bar;
2) charging a fee for the use of its facilities where people can listen to a local band (booked
by Petitioner) and dance to the music; and
3) booking national popular musical groups on selected occasions. (These musical groups
perform a concert and an admission fee is charged at the box office to those who wish to listen to
the performance. People will sometimes dance to the concert music and although dancing is not
encouraged, traditionally it is not discouraged or prevented.)
The establishment is in the nature of a concert hall, and dates back to 1912. It has been
providing live shows since 1980. It has been converted so that there are seating arrangements
including tables for patrons. A bar is on one level of the theater. The original stage remains, as well
as many mementos of the 1912 era.
The bar is not open during the week. It is only open on concert dates, and recently the
company has promoted a dance night which features a disc jockey who takes requests. Drinks are
served during performances at tables with waitress service, or patrons can be served at the bar. Of
the total receipts, 22% come from admission charges, and 78% come from the bar.
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

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Sales Tax
February 22, 1996
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 provides, in part, as follows:
(f)(1) Any 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, except charges for admission to race tracks,
boxing, sparring or wrestling matches or exhibitions which charges are taxed under any other law
of this state, or 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."
Since Petitioner provides public performances for profit in conjunction with the selling of
drinks, Petitioner's establishment falls within the definition of roof garden, cabaret or similar place"
unless it is demonstrated that its sale of drinks 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). 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. 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
the 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.
SOURCES OF INCOME
As stated before, 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 those sales
ranged from 45.l%, 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 this case, Petitioner's revenues from the sale of drinks from the bar amount to 78% of its
total revenues. This percentage is higher than in any of the cases cited above where the federal
cabaret tax was held to apply.

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TSB-A-96 (9)S
Sales Tax
February 22, 1996
EXTENT 0F 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.
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 this case, Petitioner's establishment has been converted to provide facilities for the
consumption of drinks. Petitioner's establishment contains seating arrangements, including tables,
for patrons and a bar on one level of the theater.
FOOD SERVICE
When 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 foods and refreshments, the dining
atmosphere created and extent of service available would all tend to indicate the extent to which
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.
Petitioner serves no food but does provide seating at tables for patrons to be served drinks
by waitresses, and a bar area for patrons to obtain drinks, during concert performances.
NATURE AND HOURS OF ENTERTAINMENT
The bar in Petitioner's establishment is generally only open on nights when concerts are held.
Recently, however, Petitioner has promoted a dance night which features a disc jockey who takes
requests.

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Sales Tax
February 22, 1996
CONCLUSION Based upon the totality of Petitioner's facts and circumstances, it is concluded that
the serving or selling of drinks in Petitioner's establishment is not merely incidental to the
presentation of concerts. This conclusion is supported by the fact that receipts from the sale of
drinks from the bar amount to 78% of the establishment's total receipts. In addition, Petitioner
provides seating at tables for its patrons, where they are served drinks by waitresses during
performances.
Accordingly, Petitioner's establishment is 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
Petitioner's cafe are subject to sales tax under section 1105(f)(3) of the Tax Law.

DATED: February 22, 1996

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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