Billen v. United States, 6174.

• Decision Date: 05 January 1960
• Docket Number: No. 6174.,6174.
• Citation: 273 F.2d 667
• Parties: Fred J. BILLEN, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

273 F.2d 667 (1960)

Fred J. BILLEN, Appellant, v. UNITED STATES of America, Appellee.

No. 6174.

United States Court of Appeals Tenth Circuit.

January 5, 1960.

John E. Marshall, Oklahoma City, Okl., for appellant.

Carolyn R. Just, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., and Lee A. Jackson and Robert N. Anderson, Attys., Dept. of Justice, Washington, D. C., and Paul W. Cress, U. S. Atty., and Leonard L. Ralston, Asst. U. S. Atty., Oklahoma City, Okl., of counsel, were with her on the brief), for appellee.

Before MURRAH, Chief Judge, BREITENSTEIN, Circuit Judge, and CHRISTENSON, District Judge.

BREITENSTEIN, Circuit Judge.

The issue is the liability of appellant Billen for the federal cabaret tax because of his operation of an establishment known as the Corn Crib at Oklahoma City. Billen paid the tax for the years involved and then sued to recover the amounts so paid. He appeals from an adverse judgment.¹

Billen has operated the Corn Crib since 1948. A sign on the building read "Corn Crib Dancing." The establishment was open to the public six nights a week from 8:30 P.M. to 4:00 A.M. An admission charge of 50 cents per person was made but no stags were allowed. Payment of the admission charge entitled the patron to the use of the dance floor and other facilities.

The building has an area of approximately 3,182 square feet of which 1,752 square feet were devoted to dancing space and 1,302 square feet to booths, griddle and counter space. The dancing area would accommodate about 500 dancers. No partitions separated the dance floor from the portions of the building used for seating and eating. There were 35 booths with seating capacity for 158 patrons. An additional 40 persons could be seated at tables. Juke box music was provided at the expense of the customers. No beer or whiskey was sold in the establishment but at times such liquors were brought in. Setups were provided. Cigarettes were dispensed by a vending machine. Hamburgers, cheeseburgers, coffee, soft drinks, potato chips, ice and lemons were sold at prices comparable to those charged at other outlets in the area. Knives, forks and table linen were not supplied. The cooking facilities consisted of a gas griddle, 18 × 24 inches in size, and a 2-plate electric appliance to make coffee. One man was employed to fill orders and only one waitress was employed four nights of the week. On Friday and Saturday nights two waitresses were employed. The average expenditure per person was approximately $1.00. Approximately one-half of the gross receipts were from the sale of food, setups, and soft drinks. No entertainers were employed and there was no live music. During the period involved, August 1952 to June 1956, Billen paid $9,308.54 in cabaret taxes.

Section 1700(e) (1) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 1700(e) (1), imposed a 20 per cent tax on all amounts paid for admission, refreshment, service, or merchandise at "any roof garden, cabaret, or other similar place," and provided:

"The term `roof garden, cabaret, or other similar place\' shall include any room in any hotel, restaurant, hall, or other public place where music and dancing privileges or any other entertainment, except instrumental or mechanical music alone, are afforded the patrons in connection with the serving or selling of food, refreshment, or merchandise."

In Avalon Amusement Corporation v. United States, 7 Cir., 165 F.2d 653, 654, it was held that "an establishment charging admission for dancing privileges and where refreshments are sold in connection therewith" is a roof garden, cabaret, or other similar place. In Geer v. Birmingham, D.C.N.D.Iowa, 88 F.Supp. 189, the decision was that a ballroom which made a small admission charge and which had a fountain which sold tobacco, soft drinks and confections at normal retail prices, but served no meals, was not subject to the cabaret tax. This decision was reversed by the Court of Appeals for the Eighth Circuit² on the authority of the Avalon case, the court saying that the facts in the two cases were analogous and that in the administration of taxing statutes there should be a uniformity of decision among the circuits.

Section 404 of the Revenue Act of 1951³ amended § 1700(e) (1) by adding, after the portion thereof quoted above, the following:

"In no case shall such term include any ballroom, dance hall, or other similar place where the serving or selling of food, refreshment, or merchandise is merely incidental, unless such place would be considered, without the application of the preceding sentence, as a `roof garden, cabaret, or other similar place.\'"

The purpose of this amendment was thus stated in the House Report on the Revenue Act of 1951:⁴

"The purpose of this amendment is to make it clear that the principles set forth by the district court in the case of Geer v. Birmingham (88 F. Supp. 189) are controlling in the determination of whether the establishment involved is operating as a carbaret or as a dance hall, and to avoid the broad construction placed upon the statute in the case of Avalon Amusement Corporation v. United States 7 Cir., (165 F.2d 653) and in the court of appeals decision reversing the decision of the district court in the Geer case (Birmingham v. Geer, 8 Cir., 185 F.2d 82), which require that dance halls and similar establishments be taxed as cabarets, even though the serving or selling of food, refreshments, or merchandise is merely incidental."

The provisions of §§ 4231(6) and 4232 of the Internal Revenue Code of 1954, 26 U.S.C.A. §§ 4231(6), 4232, applicable to the portion of the taxes paid after January 1, 1955, are substantially similar to § 1700(e) (1) of the 1939 Code as amended by the 1951 act.⁵

Billen contends that the legislative history of the 1951 amendment establishes that Congress intended that the tests set out in the district court decision in Geer v. Birmingham⁶ apply to determine liability for the tax and that the application of those tests to his operation discloses that he was operating a ballroom to which the tax did not apply. Specifically, he relies on the exaction of an admission charge, the relative size of the areas devoted to dancing and other purposes, the absence of a bar and entertainers, the use of mechanical music, the limited and unadvertised facilities for furnishing food, the reasonable prices charged for food, and the claim of a financial loss on the service of food.

Three district court decisions involving the statute as amended in 1951 hold that the term "incidental" refers to the source of income but each of those cases is factually...