Godwin v. Brown

• Decision Date: 11 December 1957
• Docket Number: No. 15790.,15790.
• Citation: 249 F.2d 356
• Parties: Olin S. GODWIN, District Director of Internal Revenue, William D. Self, and United States of America, Intervenor, Appellants, v. William J. BROWN, d/b/a Tia Wanna Club, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

249 F.2d 356 (1957)

Olin S. GODWIN, District Director of Internal Revenue, William D. Self, and United States of America, Intervenor, Appellants, v. William J. BROWN, d/b/a Tia Wanna Club, Appellee.

No. 15790.

United States Court of Appeals Eighth Circuit.

November 13, 1957.

Rehearing Denied December 11, 1957.

George F. Lynch, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Ellis N. Slack, A. F. Prescott, Meyer Rothwacks, Attys., Dept. of Justice, Washington, D. C., and Osro Cobb, U. S. Atty., and James W. Gallman, Asst. U. S. Atty., Little Rock, Ark., on the brief) for appellants.

D. D. Panich and William H. Bowen, Little Rock, Ark., for appellee.

Before SANBORN, WOODROUGH and JOHNSEN, Circuit Judges.

WOODROUGH, Circuit Judge.

This action was brought to recover refunds of so-called cabaret taxes for the period April 1, 1950 through December 31, 1953. During that time the taxpayer operated a public restaurant which afforded its patrons music by juke box and dancing privileges, located in Little Rock, Arkansas, known as the Tia Wanna Club. The dancing was permitted only from 8:00 P.M. until closing.

The plaintiff filed timely cabaret tax returns for the periods and made payments thereon in respect to the amounts received for food, refreshments and services in the Club pursuant to Section 1700 (e) of the Internal Revenue Code, as amended by Section 404(a) of the Revenue Act of 1951, 26 U.S.C. 1952 edition, Section 1700(e). Thereafter he agreed that additional cabaret taxes should be and they were assessed against him for the same operations over the same period and he paid them.

Following that payment he filed claim for refund on form 843 on the ground that throughout the entire period he had made his computations of the excise tax of 20 per cent on gross taxable receipts which included the 20 per cent Federal Excise and the 2 per cent State Gross Receipts taxes or 122 per cent of gross receipts and that he was assessed on that basis. He stated on the form, "This error in computation has resulted in an overpayment of Federal Excise tax of approximately 24.4 per cent more tax than should have been remitted." He attached schedules of "correct computations of tax" and asked for refunds of the over payments.

His claims for refund were disallowed and he brought this action for refund of the amounts of alleged over payments against the District Collector. He included in the complaint allegations to the effect that subsequent to his payment of the additional assessment a second additional assessment of cabaret taxes in respect to his operation of the Club for the period from January, 1951 through December, 1953, aggregating $13,058.05 had been illegally made against him which he did not claim to have paid but which he prayed to have ordered abated.

The allegations of the complaint were traversed by the District Attorney for the Eastern District of Arkansas for defendant, and dismissal of the action was prayed.

Thereafter the United States filed petition in intervention in the action with leave of court and prayed upon appropriate allegations that judgment be awarded to it for the amounts of the second additional assessment of cabaret taxes made against plaintiff for the period from January, 1951 through December, 1953, referred to in plaintiff's complaint.

The allegations of the petition in intervention were traversed by plaintiff.

On the jury trial of the case the court came to the conclusion during the taking of the testimony of the plaintiff, who was the first witness, that although the Tia Wanna Club as it had been operated through the whole period from April 1, 1950, through December 31, 1953, had been subject to the federal cabaret tax up to November 1, 1951, it had ceased to be subject to said tax on that date by reason of the amendment inserted by Section 404 of the Revenue Act of 1951, c. 521, 65 Stat. 452, 521, after the second sentence of Section 1700(e). The court appears to have reached its conclusion from consideration of the plaintiff's description of the business of the Club, the opinion of Judge Graven in the case of Geer v. Birmingham, D.C.1950, 88 F. Supp. 189, the opinion of this Court in Peony Park v. O'Malley, 223 F.2d 668 and its construction of the amendment.

No one disputed the description of the business carried on at the Tia Wanna Club as given by the plaintiff and that description brought it squarely within the provisions of Section 1700(e) both before and after the amendment referred to. Before the amendment the Section read in relevant part:

"There shall be levied, assessed, collected, and paid —

* * * * * *

"(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 room in any * * * restaurant * * * or other public place where music and dancing privileges * * * are afforded the patrons in connection with the serving * * * of food * *."

The amendment required the following to be inserted after the above:

"In no case shall such term include any ballroom, dance hall, or other similar place where the serving of food * * * 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.\'"¹

The proof in this case including the testimony of the plaintiff established that the Tia Wanna Club was a cabaret or similar place furnishing a public performance in that it was a restaurant and public place where music and dancing privileges were afforded the patrons after 8 P.M. in connection with the serving of food and such selling and serving of food was not incidental to, but a main function of the business. The plaintiff testified:

"We are in the food business. We have a family clientele, businessmen and people that just want to go out and eat good food. * * * The primary thing that we attempt to do for patrons is to seat and satisfy them and give them good food.

* * * * * *

"My particular duties with the Club are to buy supplies, cut the meat, see to it that all orders go out properly, and see to it that people get good service."

* * * * * *

"We have a clientele which orders meals in advance. Quite a few people do that. We prepare food for people who telephone their orders and take the food away from the club."

His wife testified:

"We serve steak, chicken, sea-food, but no sandwiches; nothing but meals. A steak meal ran from $3.00 up; chicken, from $1.75 up."

Judge Graven's justly praised opinion in the Geer case, supra, in no wise tends to dim the applicability of the cabaret tax to the Tia Wanna Club. The business involved in the Geer case was the operation of a public dance hall charging admission and the question considered was whether it was taxable in respect to its incidental sales of refreshments, rental of booths and check rooms under the cabaret statute or under Section 1700 (a) as a place where admission was charged.

In Peony Park v. O'Malley, supra, the cabaret tax had been collected as in the Geer case from the operator of a public dance hall where admission had been charged. The tax had been collected in respect to incidental sales. The refund was denied by the district court, 121 F. Supp. 690, and the judgment was affirmed in this Court, (233 F.2d 668). We recognized a change had been made in the cabaret tax law in respect to its applicability to sales of incidentals in public ball rooms where admission was charged, but restaurants affording music and dancing privileges in connection with the serving and selling of food were in no wise under consideration.

We find nothing in the opinions or the amendment to relieve the Club from its liability to cabaret tax. The district court was clearly mistaken in holding in this case that the Tia Wanna Club was not subject to the cabaret tax throughout the period involved in the suit.

The holding was adhered to, however, throughout the trial and the jury was instructed in accord with it. The jury was told that "plaintiff was not subject to a cabaret tax after November 1, 1951" and "that the issues of fact to be submitted would be with respect to the contentions of the parties as to the amount of cabaret taxes, if any, that were due or the excess of taxes, if any, that were paid prior to November 1, 1951." At the conclusion of all the evidence the court stated in the first instruction to the jury, "The case you have heard is one involving federal cabaret taxes for the period April 1, 1950 through October 31, 1951."

The jury returned two verdicts. In one it found in favor of the plaintiff on his claim for refund from April, 1950 to November 1, 1951, in the amount of $2,388.97. The other was an instructed verdict for plaintiff for refunds for the period from November 1, 1951 through December 31, 1953. Judgment for plaintiff was rendered on the verdicts after motion for judgment notwithstanding the verdicts or for new trial had been overruled. The judgment also ordered that the United States take nothing by reason of its intervention.

The District Director and the United States appeal.

I.

We consider first the verdict of the jury and the judgment thereon for plaintiff for refunds for the period when the court considered the Club to be subject to cabaret tax, namely, from April 30, 1950 to November 1, 1951.

The plaintiff adduced evidence from which the inference might fairly be drawn to establish his claim that he had paid the full "20 per cent of all amounts paid for refreshment service or merchandise by or for any patron or guest who was entitled to be present" during the time dancing was permitted at the Tia Wanna Club in...