Rev. Rul. 59-295

Advice has been requested concerning the applicability of the statute of limitations on assessment and collection under the circumstances described below.

The operator of an establishment filed timely Forms 720, Quarterly Federal Excise Tax Returns, reporting and paying the tax on admissions on the amounts collected from patrons for admission to his place. He made no other entries on the Forms 720 concerning liability for any other excise tax. Subsequently, it was determined that the cabaret tax instead of the admissions tax was due and should have been reported and paid. Specifically, the question presented is whether, for purposes of starting the running of the statute of limitations on assessment and collection, the filing of a Form 720 reporting and paying admissions tax satisfies the requirement for filing a cabaret tax return.

Section 4231(1) of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B., 1958-3, 92, imposes a tax of one cent for each ten cents or major fraction thereof of the amount in excess of one dollar paid for admission to any place. The tax is to be paid by the person paying for the admission.

Section 4231(6) of the Code imposes a tax equivalent to 20 percent 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. With certain exceptions not here material, the tax is to be returned and paid by the person receiving such payments.

Insofar as it is applicable here, section 6501(a) of the Code, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, provides the general rule that the amount of any tax imposed by the Internal Revenue Code of 1954 shall be assessed within three years after the return was filed (whether or not such return was filed on or after the date prescribed) and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period. However, section 6501(c)(3) of the Code provides that in the case of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

The admissions tax is one of the so-called `collected' taxes. That is, the person paying the admissions charges is the taxpayer, whereas the person collecting the charge is responsible under the law for collecting and returning the tax to the Government. Thus, the person collecting the charge is not the taxpayer and, even if he fails to collect the tax, willfully or otherwise, the tax as such cannot be asserted against him. In the case of a willful failure to collect or pay over the tax, the law provides sanctions in the form of penalties.

In contrast to the admissions tax, the cabaret tax is one of the so-called `incurred' taxes. That is, the proprietor of the establishment collecting the payments for admission, refreshment, service, and merchandise is the taxpayer. Therefore, the proprietor remains liable for the tax without regard to whether he passes it on to his patrons.

Although amounts paid for admission may be subject to either, the admissions tax and the cabaret tax are separate and distinct taxes and the requirements for filing a return apply separately to each tax, even though for convenience the return for both taxes may be made on the same form. Accordingly, it is held that where a person files a return on which he reports and pays the tax on admissions but makes no entry on the return concerning his liability for the cabaret tax, such return does not constitute a cabaret tax return. Therefore, the cabaret tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

See Revenue Ruling 58-274, C.B. 1958-1, 495, which holds that if a retailer, who is liable for the retailers excise taxes imposed by two or more sections of the Internal Revenue Code, files a return on which he reports his liability for the tax impose by one or more of those sections but makes no entry on the return concerning his liability for the tax imposed by any other section or sections, he has filed no return for the category or categories of tax for which no entry was made. Therefore, the tax for the category or categories for which no entry was made may be assessed, or a proceeding in court for the collection of such may be begun without assessment, at any time.

See also Revenue Ruling 59-127, C.B. 1959-1, 656, which states that the tax on initiation fees and the tax on dues and membership fees are separate and distinct, even though they are imposed by the same section of the Code.