How did SC PLR 92-5 apply sales tax and admissions tax to one ticket covering both a four-course meal and a live show?

Plain-English summary

South Carolina PLR 92-5 held that a one-price ticket covering a four-course meal and a live arena show was subject to both sales tax and admissions tax.

The ruling allowed the operator to divide the ticket price between the two taxes if the allocation was reasonable and supported by its records:

• sales tax applied to the portion representing the meal; and
• admissions tax applied to the portion representing admission to the show.

If the allocation was unreasonable or undocumented, both historical 5% taxes applied to the entire ticket price, for a combined 10% tax on the full charge.

Why the ticket had two taxable components

ABC planned a dinner-attraction facility where the dining area surrounded an arena. One ticket gave the patron a four-course meal and a rodeo-style show set in the “wild 1800's.”

For sales-tax purposes, the ruling considered the “true object” test. It rejected the idea that either component was merely incidental to the other. The customer bought two substantial things together: a retail meal and an entertainment service.

That meant the meal portion was taxable as a retail sale, while the show portion was not part of the sales-tax base when separately and reasonably valued.

For admissions tax, the facility was a place of amusement and the show portion was a paid admission. The Commission's longstanding package-deal practice taxed only the portion attributable to admission when a package combined tangible personal property with entry to a place of amusement.

The recordkeeping condition

The split treatment depended on a reasonable allocation supported by the taxpayer's records. Without that support, the ruling did not attempt its own allocation. Instead, it imposed each tax on the entire ticket charge.

That made documentation important: without a supported breakdown, the ruling applied each historical tax to the whole ticket instead of applying each tax only to its corresponding component.

What this means for you

Dinner theaters and bundled attractions

A single ticket can contain more than one taxable component. Under this ruling, neither the meal nor the show disappeared into the other merely because they were sold together.

Ticketing and finance teams

The price allocation needed a reasonable basis and records. A number printed on a ticket without support would not satisfy the ruling's condition.

Accountants and tax professionals

PLR 92-5 used different tax bases for different elements of one package: gross proceeds from the meal and paid admission for the show.

Current operators

Check today's sales-tax and admissions-tax statutes, rates, and Department guidance. The 5% rates in this 1991-era ruling are historical.

Common questions

Q: Was only one tax due because the customer paid one ticket price?

A: No. The ruling applied sales tax to the meal component and admissions tax to the show component.

Q: Could the operator allocate the ticket price?

A: Yes, if the breakdown was reasonable and supported by its records.

Q: What happened if the allocation was unsupported?

A: Both historical 5% taxes applied to the entire ticket charge, for a combined 10% tax.

Q: Did the ruling treat the meal as incidental to the show?

A: No. It found two true objects: the meal and the entertainment.

Q: Can another dinner attraction rely on PLR 92-5?

A: No. The ruling was temporary, fact-specific, and nonprecedential.

Citations and references

• S.C. Code Ann. § 12-36-910 — historical sales tax on retail sales
• S.C. Code Ann. § 12-36-90 — historical gross proceeds of sales definition
• S.C. Code Ann. § 12-21-2410 — admissions definition
• S.C. Code Ann. § 12-21-2420 — historical admissions tax on places of amusement
• Meyers Arnold v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920 (Ct. App. 1985)
• Regency Towers Association, Inc. v. South Carolina Tax Commission, Horry County Court of Common Pleas, Case No. 88-CP-26-1109 (1989)
• Commission Decisions #90-38 and #91-64
• Marchant v. Hamilton, 297 S.C. 497, 309 S.E.2d 781 (1983)
• Ryder Truck Lines, Inc. v. South Carolina Tax Commission, 248 S.C. 148, 149 S.E.2d 435 (1966)
• Etiwan Fertilizer Company v. South Carolina Tax Commission, 217 S.C. 354, 60 S.E.2d 682 (1950)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR92-5.pdf

Original ruling text

SC PRIVATE LETTER RULING #92-5

TO:

ABC

TAX MANAGER:

John P. McCormack

SUBJECT:

Dinner Attraction
(Sales Tax and Admissions Tax)

REFERENCE:

S.C. Code Ann. Section 12-36-910 (Supp. 1991)
S.C. Code Ann. Section 12-36-90 (Supp. 1991)
S.C. Code Ann. Section 12-21-2410 (1976)
S.C. Code Ann. Section 12-21-2420 (Supp.1991)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1991)

SCOPE:

A Private Letter Ruling is a temporary document issued to a taxpayer,
upon request, and it applies to the specific facts and circumstances related
in the request.
Private Letter Rulings have no precedential value and are not intended for
general distribution.

Question:
Is the charge by the ABC for a ticket, which entitles the patron to a meal and a show, subject to
the sales tax and/or admissions tax?
Facts:
The ABC Dinner Attraction will be opening an entertainment facility in South Carolina in the
near future. The operation will be similar to a dinner theater. For the one price ticket, the patron
is admitted to the facility and receives a four course meal and a show.
The dining area surrounds an arena where the show takes place. The show can best be described
as a rodeo and a trip back into the "wild 1800's".

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Discussion:
The issue in question is whether the charge by ABC is subject to the sales tax, admissions tax, or
both. Also, if the charge is subject to both the sales and admissions taxes, the measure or basis
for calculating the taxes must be determined.
SALES TAX
Code Section 12-36-910 imposes "a sales tax, equal to five percent of gross proceeds of sales,
upon every person engaged ... within this State in the business of selling tangible personal
property at retail."
The measure of the sales tax, "gross proceeds of sales", is defined at Code Section 12-36-90, in
part, as:
... the value proceeding or accruing from the sale, lease, or rental of tangible personal
property.
(1) The term includes:

(b) the proceeds from the sale of tangible personal property without any deduction
for:
(i)

the cost of goods sold;

(ii)

the cost of materials, labor, or service;

(iii) interest paid;
(iv) losses;
(v)

transportation costs;

(vi) manufacturers or importers excise taxes imposed by the United States; or
(vii) any other expenses.
In reviewing the above code sections, it appears that the entire charge may be subject to the sales
tax. Such a conclusion appears to be consistent with previous court cases and Commission
Decisions. (See Meyers Arnold v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E. 2d
920 (1985 App.) (lay away fees for lay away sales); Regency Towers Association, Inc. v. South
Carolina Tax Commission, Horry County Court of Common Pleas, Case No. 88-CP-2 6-1109
(1989) (maid service at a hotel); and Commission Decisions #90-38 and #91-64 (engraving
charges as part of the sale of trophies).) These cases and decisions concerned whether or not
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certain services incidental to, or associated with, the sale of tangible personal property should be
included in "gross proceeds of sales".
The so-called "true object" test is generally used to delineate sales of services from sales of
tangible personal property. Applying this test to the matter at hand, it must be determined
whether the meal or the entertainment is the true object of the transaction.
If the meal is the true object, then the entertainment is incidental to the sale of the meal and the
entire charge for the ticket would be subject to the sales tax. If the true object of the transaction
is the show, then the meal would be incidental to the show and the charge for the ticket would
not be subject to the sales tax.
The "true object" test is best described in 9 Vanderbilt Law Review 231 (1956), wherein it is
stated:
The true test then is one of basic purpose of the buyer. When the product of the service is
not of value to anyone other than the purchaser, either because of the confidential
character of the product, or because it is prepared to fit the purchaser's special need - a
contract or will prepared by a lawyer, or the accident investigation report prepared for an
insurance company this fact is evidence tending to show that the service is the real
purpose of the contract. When the purpose of a contract is to produce an article which is
the true object of the agreement, the final transfer of the product should be a sale,
regardless of the fact that special skills and knowledge go into its production. Under this
analysis, printing work, done on special order, and of significant value only to the
particular customer, is still a sale. The purchaser is interested in the product of the
services of the printer, not in the services per se. Similarly, it would seem that contracts
for custom-produced articles, be they intrinsically valuable or not, should be classified as
sales when the product of the contract is transferred.
The Vanderbilt Law Review article, in quoting Snite v Department of Revenue, 398 Ill. 41, 74
N.E.2d. 877 (1947), also establishes the following general rule :
If the article sold has no value to the purchaser except as a result of services rendered by
the vendor, and the transfer of the article to the purchaser is an actual and necessary part
of the services rendered, then the vendor is engaged in the business of rendering service,
and not in the business of selling at retail. If the article sold is the substance of the
transaction and the service rendered is merely incidental to and an inseparable part of the
transfer to the purchaser of the article sold, then the vendor is engaged in the business of
selling at retail, and the tax which he pays ... [is measured by the total cost of article and
services]. If the service rendered in connection with an article does not enhance its value
and there is a fixed or ascertainable relation between the value of the article and the value
of the service rendered in connection therewith, then the vendor is engaged in the
business of selling at retail, and also engaged in the business of furnishing service, and is
subject to tax as to the one business and tax exempt as to the other. While the above
quotes do not establish rigid rules, they do provide general guidance in determining the
purpose of a transaction, and are particularly helpful in addressing the issues of ABC.
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Here, we have a situation whereby there is not one true object, but two - the sale of a meal and
the sale of entertainment. They are sold together, and one is not incidental to the other.
Therefore, ABC "is engaged in the business of selling [a meal] at retail, and also engaged in the
business of furnishing [an entertainment] service, and is subject to [the sales] tax as to the one
business and tax exempt [for sales tax purposes] as to the other".
In addition, ABC is distinguishable from the above cited cases and decisions of Meyers Arnold
v. South Carolina Tax Commission, supra ; Regency Towers Association, Inc. v. South Carolina
Tax Commission, supra ; and Commission Decisions #90-38 and #91-64. These cases and
decisions fall into the class of transaction whereby "the article sold is the substance of the
transaction and the service rendered is merely incidental to and an inseparable part of the transfer
to the purchaser of the article sold ...." As such, "the vendor is engaged in the business of selling
at retail, and the tax which he pays ... [is measured by the total cost of article and services]."
In considering the above discussion, ABC will only be required to remit the sales tax on that
portion of the charge representing the price of the meal, provided it is reasonable and supported
by the records of the taxpayer.
ADMISSIONS TAX
Code Section 12-21-2420 imposes a 5% admissions tax "upon all paid admissions to all places of
amusement within this State ..." Code Section 12-21-2410 defines admissions as "the right or
privilege to enter into or use a place or location."
ABC is clearly a place of amusement for which a fee is paid to enter into or use. Therefore, we
must determine what is the paid admission.
While the admissions tax statute does define the words "admissions", it does not elaborate as to
what constitutes a "paid admissions". It has been the longstanding policy of the Commission to
only tax, for admissions tax purposes, that portion of a package deal that represents the price of
the admissions. (A package deal is one that includes the purchase of tangible personal property
and an admissions to a place of amusement.)
Administrative interpretation of statutes by the agency charged with their administration and not
changed by the legislative body are entitled to great weight. Marchant v. Hamilton, 297 S.C.
497, 309 S.E. 2d. 781 (1983). When as in this case, the construction or administrative
interpretation of a statute has been applied for a number of years and has not been changed by
the legislature, there is created a strong presumption that such interpretation or construction is
correct. Ryder Truck Lines, Inc. v. South Carolina Tax Commission. 248 S.C. 148, 149 S.E. 2d.
435 (1966); Etiwan Fertilizer Company v. South Carolina Tax Commission, 217 S.C. 354, 60
S.E. 2d. 682 (1950).

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Conclusion:
The charge by the ABC Dinner Attraction for a ticket is subject to both the sales tax and the
admissions tax.
However, ABC will only be required to remit the sales tax on that portion of the charge
representing the price of the meal and the admissions tax on that portion of the charge
representing the price of the admissions, provided the price breakdown is reasonable and
supported by the records of the taxpayer.
If the price breakdown is not reasonable or not supported by the records of the taxpayer, then
both the sales tax and the admissions tax will apply to the entire charge for the ticket. In other
words, the entire ticket will be taxed at 10% (5% sales tax plus 5% admissions tax).

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