Busey v. Deshler Hotel Co., 8982.

• Decision Date: 08 July 1942
• Docket Number: No. 8982.,8982.
• Citation: 130 F.2d 187,142 ALR 563
• Parties: BUSEY, Collector of Internal Revenue, v. DESHLER HOTEL CO.
• Court: U.S. Court of Appeals — Sixth Circuit

142 ALR 563, 130 F.2d 187 (1942)

BUSEY, Collector of Internal Revenue, v. DESHLER HOTEL CO.

No. 8982.

Circuit Court of Appeals, Sixth Circuit.

July 8, 1942.

Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, J. L. Monarch, and Fred J. Neuland, Sp. Assts. to Atty. Gen., Leo Calvin Crawford, of Dayton, Ohio, and Justin H. Folkerth, of Columbus, Ohio, for appellant.

Butler & Summer, of Columbus, Ohio, for appellee.

Before SIMONS, ALLEN, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

On the original hearing of this cause, the judgment of the district court in favor of the appellee taxpayer was affirmed on order, inasmuch as the findings of fact, conclusions of law and opinion of the district judge made clear the correctness of the decision below.

After entry of the order of affirmance, appellant presented supplemental memoranda, embracing legislative history of the pertinent Revenue Act and appertaining treasury regulations and examples not previously submitted. Upon application for rehearing, the previous decision was withdrawn, pending further consideration. After weighing the supplemental data and the new arguments of appellant, the majority of the court adheres to the original unanimous decision that the judgment of the district court should be affirmed.

That judgment, from which the Collector of Internal Revenue has appealed, awarded a refund, with interest, of penalties amounting to $6,056.70 collected from appellee under Sec. 1114(d) of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev.Acts, page 325. These penalties had been assessed and collected under protest from appellee, for failure of the appellee hotel company to collect and account for taxes on admissions to one of its dining rooms. The insistence of appellant was, and is, that the taxes were properly assessed and collected pursuant to Sec. 500(a) (5) of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev.Acts, page 272, which imposes a "tax of 1½ cents for each 10 cents 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 to be 20 per centum of the amount paid for refreshment, service, and merchandise; such tax to be paid by the person paying for such refreshment, service, or merchandise." The statute further provided that "where the amount paid for admission is 50 cents or less, no tax shall be imposed."

A jury being waived, the district court tried the case upon stipulated facts, supplemented by exhibited newspaper advertisements and numerous menus showing prices charged for food and drink in the three dining rooms of appellee's one-thousand-room hotel in Columbus, Ohio. The agreed statement of facts was adopted by the district court and included in its findings. These fact findings will be briefly surveyed.

The three dining rooms in the large, first-class hotel operated by appellee were called, respectively, the Sapphire, the Spanish and the Ionian. The Ionian Room, known also as the Grill Room, was an artistically decorated, low ceilinged, popular-priced restaurant located in the hotel basement. Its seating capacity was approximately 300 people and it was kept open early and late, seven days a week, for the service of breakfast, lunch, dinner, late supper, and alcoholic beverages. Quick service was featured.

Continuously since 1934, the hotel has provided an orchestra or band to play dance music in the Ionian Room, but no special dance floor has been provided. Dancing was made possible for some thirty-six persons simultaneously by the removal of perhaps ten tables from a 22 by 22 foot space in front of the orchestra platform, the total floor space of the Ionian grill room being approximately 4000 square feet. At times, a member of the orchestra would furnish an instrumental solo, or a vocalist member would sing the lyrics of the dance number being played by the orchestra. Neither orchestra nor soloists left the platform. There was no music or dancing on Sundays, and on secular days dancing was limited to periods from 6:00 P. M. to 8:30 P. M., and from 10:00 P. M. to 1:00 A. M.

No door or special charge and no cover or minimum charge was exacted for entry into the Ionian Room. Indeed, the only charge made was for whatever food or drink the entrants chose to purchase. If no purchase was made, no charge was made; and persons dining in the Sapphire and Spanish Rooms were permitted to use, without charge, the dancing facilities of the Ionian Room.

The scale of prices for food and refreshments was lower in the Ionian Room than in the other two dining rooms, which were more exclusive and featured better and more dignified service.

There was no general increase in the prices charged for food, service and beverages in the Ionian Room after the permanent installation of orchestra and band music. The prices charged were the same on Sundays as on week days.

It was stipulated into the record that ten residents of Columbus, Ohio, if called as witnesses, would have testified, that their principal reason for patronizing the Ionian was for music and dancing, and that the room was well known in Columbus as a popular place for dancing.

Among the important findings of fact of the district court were the following:

"13. That prices for food during the late supper hours while the music was playing, were substantially the same as the prices for food during the luncheon hours when no music was playing. That in some instances, the price of an article was slightly higher during the luncheon hours than at the late supper hours; and in some instances, the price of an article was higher at the late supper hours than at the luncheon hours.

"14. That prices for food during the dinner hours when the music was playing were exactly the same as the prices during the luncheon hours when no music was playing.

"15. That the prices of beverages, both alcoholic and non-alcoholic, remained constant through all hours of the day and night.

"16. That there was no charge for admission to the Ionian Room included in the prices paid for refreshment, service, or merchandise, or in any other guise.

"17. That said performances in the Ionian Room were public performances.

"18. That said performances were not performances for profit."

Based on its findings of fact, supported by a preponderance of evidence, the district court adjudged that the penalties had been improperly assessed and that the appellee hotel company was entitled to recover the taxes unlawfully exacted by the collector.

Applying the principle of Federal Rules of Civil Procedure, rule 52, 28 U.S.C.A. following section 723c, that findings of fact of a district court shall not be set aside unless clearly erroneous, this court in its order of affirmance recited:

"* * * And it appearing that while appellee employs an orchestra at specified times which gives public performances in appellee's restaurant called the Ionian Room, appellee does not conduct in its Ionian Room a roof garden, cabaret, or other similar entertainment; and that the district court found as a fact that there is no direct charge for admissions to the Ionian Room; that no charge for admission is either wholly or in part included in the price paid for food, refreshment or service, and that the performances given by such orchestra are not given for profit within the purview of Sec. 500(a) (5) of the Revenue Act of 1926, and it appearing that the record amply sustains such findings;

"It is ordered that the judgment of the district court be, and it hereby is, affirmed."

The majority of the court is of opinion that no new proposition adduced by appellant on rehearing gainsays the correctness of our former decision.

The language of the Revenue Statute, quoted supra, is plain and unambiguous, applying in terms only to any public performance for profit at a 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.

It is contended by the Collector that the vocal and instrumental soloist performances of the orchestra, and the dancing by patrons in the Ionian Room, constituted "other similar entertainment" within the definition of Treasury Regulation 43, 1932 Ed., Article 11, which provides: "`Any public performance for profit at any roof garden, cabaret, or other similar entertainment' includes every public vaudeville or other performance or diversion 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 professionals, amateurs, or patrons under the auspices of the management, in connection with the service of 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."

The Collector buttresses his argument with examples under Article 11 of the Treasury Regulations, whereof the second example reads: "A certain hotel maintains in its lobby a dancing floor surrounded by tables and serves refreshments to its patrons during the dancing hours. No charge is made for dancing. This is a case of a public performance for profit where the amount paid for admission is wholly included in the price paid for refreshments, and there will be a tax, therefore, under these provisions of the Act."

The third example states that it is immaterial whether the dancing facilities furnished are in the dining room or in the lobby of the hotel.

It is contended that the findings of the district court overthrew the interpretation of the Revenue Statute by those charged with its administration.

In order to bring...