Motion Picture Herald (Sep-Oct 1941)

September 27, 1941 MOTION PICTURE HERALD 21 TAX ON ALL ADMISSIONS AT NEW RATE BECOMES EFFECTIVE OCTOBER 1 One Cent Levy on Each Unit of Ten Cents or Fraction Starts Wednesday; New Tickets; First Payment Due Nov. I All theatre admission price scales become subject to federal tax, virtually all exemptions are ended, and most amusement enterprises competing with motion pictures must pay ticket taxes under the 1941 federal revenue bill which became law on September 20th. President Roosevelt at Hyde Park signed the measure on Saturday after the joint House and Senate conference had reached agreement on disputed passages. Both chambers passed the bill by a voice vote. The law, insofar as it affects theatres, becomes effective on October 1st. The ticket tax and other excise levies, many of which will indirectly hit theatre operators, must be collected on and after next Wednesday. The rate at which tickets to motion pictures and other theatrical entertainments are to be taxed is equal to one cent on each ten cents, or portion thereof, charged for admission. This is not equivalent to a ten per cent levy. In practice the fractional levy cuts deeper into the public's entertainment dollar. Services Pay Reduced Tax Exemptions under the admissions amendment to the revenue bill are sharply restricted. All persons, with the exception, of some children, bona fide employees, municipal and state officials on business, and members of the armed services or the CCC in uniform, must pay the tax. The law assesses a tax on free or reduced admissions equivalent to the tax on the regular admission price then in force for similar accommodations. Soldiers, sailors, marines, coast guardsmen and members of the Civilian Conservation Corps, when in uniform, are required to pay tax only on the price which they actually pay for the special half-price or cut rate service tickets now granted by many theatres and circuits. The clause exempting childrens' tickets from the tax applies only where the admission is less than ten cents and the children less than 12 years of age. Also, school entertainments, both high school and elementary, are not required to pay the tax. College theatres, institutions, churches and many other educational or benevolent institutions exempted in previous laws are now required to collect the federal tax, legal experts assert. The admissions tax amendment to the 1941 Revenue Law as passed by Congress and signed by the President continues on the statute books the measure which was first written and enacted in 1917 as a wartime emergency law. The tax rate is identical with that in force during the war years, experts point out, but even more exemptions have been dropped from the bill, now making it the most inclusive admissions tax ever on the federal statutes. Lawyers point out that the tax rate of one cent on each ten cents or fraction has remained in force since 1917. Entitled Section 1700 A-l, amending the Internal Revenue Code, it was never repealed. After the war, however, exemptions were progressively increased until in the late '20s only tickets in excess of $3.00 HERE'S THE TAX AFTER OCTOBER FIRST The following table shows the federal admissions tax which all theatres must start collecting on October first under the provisions of the new rev enue law. Admission Price Tax Ic to 10c Ic 1 1 c to 20c 2c 21c to 30c 3c 31c to 40c 4c 41c to 50c 5c 51c to 60c 6c 61c to 70c 7c 71c to 80c 8c 81c to 90c 9c 91c to $1.00 10c Children under 12 years of age are exempt from tax if the admission is less than 10 cents. For other exemptions see adjoining cohimns. were taxed. During the depression the exemptions were gradually lowered down the admissions price scale. The last previous reduction occurred on July 1st, 1940 when the exemption was cut from 40 to 20 cents. The tax was first imposed on October 3, 1917, when a rate of one cent on each 10 cents or fraction thereof was applied to all admissions in excess of five cents. On February 24, 1919 the exemption was entirely eliminated. After nearly three years with no exemption, the Revenue Act of 1921, effective January 1, 1922, provided a 10-cent exemption. The act effective July 2, 1924, raised the exemption to 50 cents. Two further increases raised the exemption, effective March 28, 1926 to 75 cents, and on June 29, 1928 to $3. With the advent of depression, the Administration began to look for new sources of revenue and in the Revenue Act of 1932, effective June 21st the admission-tax exemption was dropped to 40 cents. No further changes were made in the exemption until the Act of 1940, effective July 1, last year, dropped it to 20 cents. Free Admissions Taxed The law, as amended in its latest passage through the Congressional hopper with the annual revenue bill is explicit in its phrasing. Section 541 of the Revenue Act of 1941 states : "A tax of 1 cent for each 10 cents or fraction thereof of the amount paid for admission to any place, including admission by season ticket or subscription. In the case of persons (except bona fide employees, municipal officers on official business, children under twelve years of age, members of the military or naval forces of the United States when in uniform, and members of the Civilian Conservation Corps when in uniform) admitted free or at reduced rates to any place at any time when and under circumstances under which an admission charge is made to other persons, and equivalent tax shall be collected based on the price charged to such other persons for the same or similar accommodations, to be paid by the person so admitted. No tax shall be imposed on the amount paid for the admission of a child under 12 years of age if the amount paid is less than 10 cents. "Section 1701 of the Internal Revenue Code (relating to exemptions from admissions tax) shall not apply with respect to amounts paid, on or after the effective date of this part, for admission." Lowering of the price exemption to cover all theatre admissions and the heavy slash in exemptions will almost double the tax's yield to the federal treasury during the next twelve months Treasury Department experts estimate The new bill will add approximately $62,400,000 to the $76,073,791 which the United State collected through the boxoffice during the year ended August 1st the statisticians predict. Some predict that theatre patrons will pay almost $140,000^00 to Uncle Sam this year. During the 1939-40 season when the exemption started at 40 cents theatre taxes brought in only $22,000,000. Every theatre manager must start collecting the tax commencing next Wednesday, October 1st. The first payment to the Bureau of Internal Revenue, for taxes collected during October, will not be due until November 30th, however. All tickets will be subject to the tax, including single admissions, season tickets, special discount coupon books, two-for-one tickets and other special forms of admission. Forms for reporting the new tax payments will be prepared by the Bureau of Internal Revenue and distributed to theatres who have paid previous taxes. Responsibility for securing the forms and correctly reporting the tax«-s rests with the exhibitor. New Tickets Needed Tickets sold after October 1st must bear the price of admission and the price of the tax, in accord with Section 1702 of the Internal Revenue Code. Only those houses which have been charging less than 20 cents will be required to obtain new ticket forms. On current stocks of tickets, however, the new tax miy be overprinted or rubber stamped. Where the established admission price is changed to absorb or adjust itself to the new tax law the change must be overprinted or stamped on the tickets until new ones are secured. Where the established price is not changed and is to include the tax the Commissioner of Internal Revenue will permit tickets now on hand to be used until properly printed tickets may be obtained. Where tickets do not show established price and tax, managers must keep, near the door or box office conspicuous signs stating the prices of admission, taxes due, and the proper combined totals of admission and tax. Exhibitors, particulary those paying the tax for the first time, are advised to keep careful record of the numbers of tickets sold, price changes, and gross receipts after October 1st. Tax lawyers recommend that the number of the last tax exempt tickets sold on the evening of September 30th be carefully recorded. The Bureau of Internal Rvenue may demand records at any time. While the admissions tax clause of the revenue bill most directly affects theatre ow ners many other portions of the new law, which is the steepest tax bill in American history, will also concern them. Many excise, or so-called "hidden" taxes will add to operating expenses after October 1st while new personal and corporate income taxes become due on March 15, 1942. A ten per cent levy is provided for photographic equipment, optical goods, electric si;_;ns, electric, gas and oil appliances, business machines, phonographs and records, air conditioners {Continued on following pocie)