Rev. Rul. 59-281

Advice has been requested whether the cabaret tax applies to amounts paid for admission, refreshment, service, or merchandise, at a cocktail lounge or a restaurant under the circumstances described below.

A cocktail lounge presents a musical and novelty act which consists of a violinist and a guitarist who move from table to table as they play. In addition to playing their instruments, the performers stop at individual tables to twist rubber balloons into shapes of various animals. They then tell and act out stories about the balloon animals which they have `sculptured.' While their conversation is audible only to the patrons at nearby tables, the act is performed in full view of the patrons in the room.

Section 4231(6) of the Internal Revenue Code of 1954 imposes a tax upon 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.

Subject to certain exceptions not applicable in the instant case, section 4232(b) of the Code provides that 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.

It is held that, since the act described above takes place in full view of the patrons in the room and involves the sculpturing of balloons into animals and the telling and acting out of stories about these animal figures, such musical and novelty act is considered to be entertainment other than instrumental or mechanical music alone. Therefore, the management of a cocktail lounge or restaurant in presenting such a musical and novelty act is furnishing a public performance for profit within the meaning of section 4231(6) of the Code. Accordingly, the cabaret tax, imposed by section 4231(6) of the Code, will attach to all amounts paid for admission, refreshment, service, or merchandise by all patrons who are entitled to be present during any part of the time such entertainment is furnished.