Motion Picture Herald (Sep-Oct 1941)

October 4, 1941 MOTION PICTURE HERALD 25 U.S. ISSUES OFFICIAL RULES FOR EXHIBITORS UNDER NEW WAR TAX Treasury's Instructions on New Tax Changes with Respect to the Taxes on Admissions and Dues Effected by the Revenue Act of 1941. . . . Collectors of Internal Revenue and Others Concerned : Treasury Reminds Exhibitors Increase Started at 12:01 A.M., October 1st; Managers Responsible for Learning Scale Regulations covering the changes in the new Federal war-and-defense admission tax provisions which went into effect "as of the first moment of October 1," were issued by the U. S. Internal Revenue Bureau this week in the form of a mimeographed letter to all collectors of internal revenue, signed by Commissioner Guy T. Helvering. The new tax is one cent on each ten, beginning with the first ten. Heretofore all tickets of 20 cents or less were exempt. The reminder that the changed levy became effective at the "first moment" — 12:01 A.M. of October 1 was interpreted as aimed at theatres throughout the country which remain open until the small hours of each morning to catch "night shift" patronage from defense plants, also theatres which run midnight shows. Collectors were urged to circulate the information regarding the new situation to all persons concerned, in order that there might be no misunderstanding of the Government's requirements. It is the understanding, however, that it is the personal responsibility under the law for each exhibitor to acquaint himself with the specific tax requirements. Official text of these requirements appear in adjoining columns. New Forms Prepared Revised forms for the reporting of tax collections are now being developed and are to be ready for use next month when exhibitors prepare their October returns. Attention was particularly called by Washington to the fact that free or reduced rate tickets allowed certain classes of customers are now taxable only on the actual amount for which sold, if any charge is collected, but other recipients of such tickets must pay the same tax as if they were bought at the established price. Exhibitors whose admission price of not exceeding 20 cents has heretofore exempted them from the tax requirements now are required to collect taxes from their patrons, and the letter to collectors explained that, where there is delay in securing new tickets, properly printed to show the tax, they will be permitted to use tickets on hand, provided they are properly overprinted or overstamped to show the price and tax. Exhibitors Ponder Admission Tax Action Meanwhile, at mid-week, as the new Federal admissions tax became effective, exhibitors all over the country were pondering what to do about it — many raising admissions to conform with the tax, many absorbing it, and hundreds of others were conferring independently on the subject or at organizational meetings. At the Savery Hotel in Des Moines on Monday, 150 exhibitors of the Iowa and Nebraska Independent Theatre Owners met and decided to increase adult admissions to provide for the Federal tax. Admissions will be increased from 16 to 20 cents ; from 21 to 25 cents and from 26 to 30 cents. Children's admissions will be 10 cents, including the state sales tax, it was voted. The Revenue Act of 1941, approved September 20, 1941, effected certain changes with respect to the taxes on admissions and dues, and it is believed desirable that appropriate information regarding these changes should be circulated at the earliest practicable moment to al! persons" in your districts who may be concerned with the collection of the taxes on admissions and dues or the taxes applicable to cabarets and similar places of amusement. All of the changes in the existing law with respect to the taxes on admissions and dues which are brought about by the Revenue Act of 1941 are effective as of the first moment of October 1, 1941 (10 A.M. of October 1, 1941, in the case of cabarets, roof gardens, etc.). Section 1700(a)(1) of the Internal Revenue Code is amended by section 541 of the Revenue Act of 1941 so as to make the present rate of tax on admissions applicable to the amount paid for admission to any place regardless of the amount of such admission charge, except that any admission charge of less than 10 cents made to a child under 12 years of age will be exempt from the tax. Under the amendment all persons admitted free, or at a reduced rate (except bona fide employes, municipal officers on official business, children under 12 years of age, members of the military and naval forces of the United States when in uniform, and members of the Civilian Conservation Corps when in uniform), are liable for a tax based on the established price of admission to other persons for the same or similar accommodations. Therefore, employes, municipal officers on official business, members of the military and naval forces of the United States and members of the Civilian Conservation Corps when in uniform are not liable for tax if admitted free, and if admitted at a reduced price are liable for tax on the reduced price. The exception with respect to free or reduced-rate admissions to spoken plays is eliminated. Section 1701 of the Internal Revenue Code, under which there are a number of exemptions such as where the proceeds of the admissions inure to religious, educational, or charitable organizations, agricultural fairs, Veterans' organizations, etc., and admissions to certain concerts, is repealed in its entirety. Consequently, Attorneys for Tri-State Theatres, Inc., who had worked on price scales with state and Federal attorneys, led the discussion on the tax question. Leo F. Wolcott, president of the ITO, presided. More than 100 exhibitors, representing some 200 theatres in the Buffalo area also met on Monday at a meeting of the Motion Picture Theatre Owners of Western New York, at 505 Pearl Street, MPTO headquarters. The decision was to add the new Federal tax to the admission price, rather than increase admissions. A. Charles Hayman, MPTO president, presided. First run theatres in Cincinnati, it was reported this week, will not revise their admissions for adults because of the new tax, but price for children will be increased from 15 to 17 cents. Revised scales for the subsequent run houses will be determined at meetings now in no further exemptions shall be allowed for entertainments to be held on or after October 1, 1941, regardless of the disposition which may be made of the proceeds from the admissions. If any exemption certificates have already been issued by your office for entertainments to be held on or after October 1, 1941, the appropriate parties should be advised that they will be required to overstamp their tickets and to collect and account for the tax on all admission charges collected on and after October 1, 1941. This information should be given the widest publicity, particularly as to churches, schools, posts of the American Legion, and other organizations which have heretofore been entitled to exemption in respect of admissions inuring to their benefit. Section 1700(e) of the Internal Revenue Code, under which a tax was imposed on amounts charged at cabarets, roof gardens, etc., has been amended in three important respects, namely, (a) the tax rate will be 5 per centum of the total amount paid for admission, refreshment, service, or merchandise, if the amount so paid, or any portion thereof, entitles the patron to be present during any portion of a performance at a roof garden, cabaret, or similar place furnishing a public performance for profit, (b) the provision exempting the admission charge if the amount paid was 50 cents or less (that is, if the amount paid for refreshment, service, or merchandise was under $2.50) has been eliminated, and (c) the tax is imposed upon, and shall be returned and paid by, the person receiving such payments. This tax is not required to be collected from the patron, as heretofore, but there is no objection to the cabaret, etc., passing it on to the patron if billed separately and in the exact amount. Since there are a number of motion picture theaters, skating rinks, dance halls, etc., the admissions to which were not taxable before October 1, 1941, but which will be taxable on that date and thereafter, appropriate information should be circulated to such theaters, skating rinks, dance halls, etc., at the earliest practicable moment ; and they should be advised that all admission charges are subject to the tax except in the case of admissions of less (Continued on following page, column 2) progress by the Greater Cincinati Independent Exhibitors League. Last week, however, Pete Wood, secretary of the Ohio ITO, issued a bulletin advising theatre owners to consider a general increase in admission prices as of October 1st. He pointed out that exhibitors should bear in mind that the Federal admission tax amounts to a minimum impost of 12 per cent upon the box office receipts. Ohio has a 0.3 per cent tax. Mr. Wood also said that "every exhibitor should dispel the thought of adjusting his price scale to absorb the tax. As a matter of fact, the law is worded so as to give every theatre owner a legitimate reason for passing the tax on to the patron." Tn Detroit, representatives of more than 100 theatres including the Cooperative Theatres of Michigan, and many independents, informally (Confirmed on following page, column 1)