Birmingham v. Geer

• Decision Date: 10 November 1950
• Docket Number: No. 14140.,14140.
• Citation: 185 F.2d 82
• Parties: BIRMINGHAM v. GEER et ux.
• Court: U.S. Court of Appeals — Eighth Circuit

185 F.2d 82 (1950)

BIRMINGHAM v. GEER et ux.

No. 14140.

United States Court of Appeals Eighth Circuit.

November 10, 1950.

Harry Marselli, Sp. Asst. to Atty. Gen. (Theron Lamar Caudle, Asst. Atty. Gen., Ellis N. Slack, A. F. Prescott, and George R. Parsons, Sp. Assts. to Atty. Gen., Tobias E. Diamond, U. S. Atty., and William B. Danforth, Asst. U. S. Atty., Sioux City, Iowa, on the brief), for appellant.

Thomas B. Roberts, Des Moines, Iowa, and Christopher T. Boland, Washington, D. C. (Clyde B. Charlton, Louis A. Parker, Joseph Brody and Charles E. Harris, all of Des Moines, Iowa, on the brief), for appellees.

Before SANBORN, WOODROUGH and JOHNSEN, Circuit Judges.

WOODROUGH, Circuit Judge.

The plaintiffs, a partnership, have operated a ballroom in Fort Dodge, Iowa, since 1938, known as the Laramar Ballroom, and have always paid the federal excise tax based on their admission charges, under 26 U.S.C.A. § 1700(a) (1), but for business done by them on December 9, 1948, they were compelled to pay the cabaret tax in the amount of $44.90 under 26 U.S.C.A. § 1700(e) on the amounts paid by patrons for soft drinks, chewing gum, candy bars, cigarettes and checkroom service. They brought this action against the Collector of Internal Revenue for refund of that amount on the ground that they were not subject to the cabaret tax and they recovered judgment against him as prayed. The opinion of the District court is reported in 88 F. Supp. 189. The Collector appeals.

A full description of all the operations carried on by the taxpayers at the Laramar Ballroom and of the place itself is set forth in the court's opinion, and the opinion also very completely describes the places that are known as cabarets and sets forth the points of difference between the layout and operations of places known as dance halls or ballrooms and places known as cabarets. The Collector does not claim on this appeal that the court erred in any of its findings describing the operations or the differences. He concedes that the Laramar Ballroom is not a cabaret within the generally understood meaning of that word. His contention is here, as it was in the District court, that Section 1700(e), as amended by Section 622 of the Revenue Act of 1942, required the imposition of the tax in question upon these taxpayers in respect to their operation of the Laramar Ballroom.

The provisions which he specifies and relies on read:

Section 1700. There shall be levied —

"(e) Tax on cabarets, roof gardens, etc., —

"(1) Rate. A tax equivalent to 20 per centum of all amounts paid for admission, refreshment, service, or merchandise, at any roof garden, cabaret, or other similar place furnishing a public performance for profit, by or for any patron or guest who is entitled to be present during any portion of such performance. The term `roof garden, cabaret, or other similar place' shall include any * * * hall, or other public place where music and dancing privileges * * * are afforded the patrons in connection with the serving or selling of * * * refreshment, or merchandise. A performance shall be regarded as being furnished for profit for purposes of this section even though the charge made for admission, refreshment, service, or merchandise is not increased by reason of the furnishing of such performance. No tax shall be applicable under subsection (a) (1) on account of an amount paid with respect to which tax is imposed under this subsection.

"(2) By whom paid. The tax imposed under paragraph (1) shall be returned and paid by the person receiving such payments." 26 U.S.C.A. §§ 1650, 1700.

Treasury Regulations 43 (1941 ed.):

Sec. 101.14 as amended by T.D. 5192, 1942-2 Cum.Bull. 249. "Scope of Tax. — The term `roof garden, cabaret, or other similar place' includes 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. A public performance furnished at a roof garden, cabaret, or other similar place shall be regarded as being furnished for profit for purposes of this section even though the charge made for admission, refreshment, service, or merchandise is not increased by reason of the furnishing of such performance.

"Where music, whether by an orchestra, a mechanical device, or otherwise, and a space in which the patrons may dance is furnished in the dining room of a hotel, or in a restaurant, bar, etc., the entertainment constitutes a public performance for profit at a roof garden, cabaret, or similar place, and the payments made for admission, refreshment, service, and merchandise are subject to the tax.

* * * * * *

"Examples. (1) A proprietor of a dancing establishment provides for the serving of refreshments to his patrons. An admission or cover charge is made to each patron. In this case the admission or cover charges and also the charges for refreshment, service, and merchandise are subject to the tax. * * *"

Opinion.

In Avalon Amusement Corporation v. United States, 7 Cir., 165 F.2d 653, the taxpayer operated a dance hall and received charges made for check room service in respect to which the Collector imposed cabaret tax under the statute here invoked. The taxpayer paid it and sued for refund. It appeared to the Court of Appeals for the Seventh Circuit that the "case presents two questions: whether the plaintiff-appellant's dance hall is a `roof garden, cabaret, or other similar place furnishing a public performance for profit' within the meaning of Section 1700(e)(1) of the Internal Revenue Code 26 U.S.C.A.Int.Rev.Code § 1700 (e)(1), and secondly, whether the checkroom service for which the plaintiff receives a charge is a service subject to the tax. Only the tax on the checkroom service is involved here."

In answer to the first of the questions, the court said:

"It seems clear to us that the plaintiff's dance hall comes within the definition of a `roof garden, cabaret, or other similar place' as provided in the statute. The definition, to quote the statute, is as follows: `The term "roof garden, cabaret, or other similar place" shall include any * * * hall * * * where music and dancing privileges * * * are afforded the patrons in connection with the serving or selling of * * * refreshment * * *.'

"The plaintiff argues that this definition applies to a situation in which a dancing privilege is a mere incident to the charge for food or refreshments. With this we are unable to agree. We can see no justification for so torturing the plain meaning of the phrase `in connection with' — it does not connote that those things connected are also in relationship of primary and subsidiary. An establishment charging admission for dancing privileges and where refreshments are sold in connection therewith is a `roof garden, cabaret, or other similar place.' The plaintiff's dance hall meets these specifications."

Answering the second question, the court said: "Was the operation of the dance hall under these circumstances `a public performance for profit?' We think that it was. A hall in which music for dancing is furnished to any one of the public who is able and willing to pay the admission fee is an establishment furnishing `a public performance for profit.' The fact that the public participates in the performance by dancing to the music furnished by the plaintiff does not make it any the less a performance; the performance is certainly open to the public, and the plaintiff operates the dance hall for profit. Apparently, one who pays his admission may sit around and watch the dancing without participating therein and be served refreshments. In any event, there is here a public performance for profit."

The court also attributed favorable consideration and weight to the Regulation and Example (1) above set forth.

It is important that, so far as possible and particularly with respect to questions affecting the administration of taxing statutes, there should be uniformity of decision among the circuits. We would not be justified in refusing to follow the decision of the Circuit Court of Appeals in the Avalon case unless convinced that it was clearly wrong. United States v. Armature Rewinding Co., 8 Cir., 124 F.2d 589, 591; United States v. Kelley, 8 Cir., 110 F.2d 922, 924; Grain Belt Supply Co. v. Commissioner of Internal Revenue, 8 Cir., 109 F.2d 490, 492.

The facts controlling decision in the Seventh Circuit are analogous to the facts here and this court must either declare itself in accord or announce decision in conflict. Despite vigorous arguments to the contrary, it appears as clear to this court as it did to the court in the Seventh...