19 Taxes 742 (1941)
Washington Tax Talk

handle is hein.journals/taxtm19 and id is 742 raw text is: Implications of the Cabaret Tax
Jack and Jill went to the bar
To get a glass of beer.
10 they laid across the board,
Summoning the barman who roared
10  is the price my dears,
Following Section 542, this year.
However, Jack and Jill won't go thirsty because, if
the barman wishes to stay in business and meet his
neighbor's competition, he will swallow the extra half
penny himself.
The Revenue Act of 1941 has some very harsh
provisions, some made unjustly so by the Regulations
of the Bureau. We are presently concerned with Sec-
tion 542 of this Act,1 commonly known as the tax on
cabarets, roof gardens, etc.
This particular section provides that there shall be
a tax equivalent to 5 per centum of all amounts
paid for admission, refreshment, service and merchan-
dise at any roof garden, cabaret, or other similar place
furnishing a public performance, for profit, if any pay-
ment, or part thereof, for admission, refreshment, service
or merchandise, entitles the patron to be present dur-
ing any portion of such performance.
This tax is not new. The substance of this law was
first enacted in the Revenue Act of 1918 and carried
down through the Revenue Act of 1940.2          It was
originally considered a sort of tax on admissions to
the type of place previously mentioned. However
there was no difficulty incurred in collecting this tax
from the consumer because the person receiving this
'Section 1700(e) of the I. R. C.
2 Section 1700(e) of the I. R. C. of 1940 provided for a tax of 20
for each 100 or fraction thereof of the amount paid for admission
to any public performance for profit at any roof garden, cabaret
or other similar entertainment to which the charge for admission is
wholly or In part Included In the price paid for refreshment service
or merchandise: the amount paid for such admission to be deemed
20% of the amount paid for refreshment service or merchandise;
where the amount paid for admission is 500 or less, no tax shall be

''service or merchandise had to incur a bill of over
$2.50 for the evening in order to become liable to the
tax under the previous rule.
Under the present law, the tax is imposed on the
entire gross receipts of any place deemed to be a
cabaret, roof garden and the like if they-furnish a
public performance for profit.
The regulations provide in substance that the corner
bar room or hole in the wall restaurant is subject
to Section 542 of the Act if it furnishes a public
The Bureau of Internal Revenue has ruled that
  .   any public performance for profit includes
every public vaudeville or other performance or diver-
sion in the way of acting, singing, declamation or
dancing either with or without instrumental or other
music conducted for the profit of the management by
prnfesinals, amateurs, or patrons under thc auspices
of the management, in connection with the selling of
food or other refreshment or merchandise at any room
in any hotel, restaurant hall or other public place.
Every form of entertainment so conducted is included,
except instrumental music unaccompanied by any other
form of entertainment.3
It would appear that the Regulations cited above
are broad enough to include the water bugs dancing
in the kitchen sink whenever a stream of water is
played upon them.
A broad analysis of the law as presently interpreted
by the Treasury indicates severe economic consequences
upon small taverns, restaurants and the like if they
have radios and juke boxes furnished for the enter-
tainment of their patrons. These places in most cases
will not advance their selling prices because of com-
petitive conditions. That is, their neighbor across the
street who has no music or entertainment outside of an
occasional bar room brawl, need not raise his prices
I Regulation 43:101.14.

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