Petitioner, an instrumentality of a State, operated on a
nonprofit basis a public bathing beach to which all persons
entering were charged admission. For failure to collect and pay the
tax imposed by § 1700(a) of the Internal Revenue Code on charges
for "admission to any place," penalties were assessed against
petitioner under § 1718 of the Code.
Held:
1. Having paid the penalties from its general revenue fund,
petitioner's financial interest was sufficient to give it standing
to sue for refund. P.
338 U. S.
414.
2. Within the meaning of § 1700(a), the charge made by
petitioner for admission to the beach was an "amount paid for
admission to any place," and that section was applicable. Pp.
338 U. S.
414-419.
(a) Congress did not intend by § 1700(a) to tax only admissions
to "spectator entertainments." P.
338 U. S.
415.
(b) The beach area here involved was a "place" within the
meaning of § 1700(a)(1). Pp.
338 U. S.
415-416.
(c) Congress did not intend to exempt nonprofit operations from
the admissions tax imposed by § 1700(a) of the Code,
notwithstanding certain exemptions that had previously been
allowed. P.
338 U. S.
416.
(d) That activities conducted by a municipality were not
intended to be exempt from the admissions tax is indicated by a
long continued administrative construction, expressly denying such
exemption, which has been followed by repeated reenactment of the
relevant language without change. Pp.
338 U. S.
416-418.
(e) The fact that petitioner's beach patrons make use of a beach
and its facilities, and that its admission charge may by local law
be considered a "use tax," does not render § 1700(a) inapplicable.
Pp.
338 U. S.
418-419.
3. The application of the admissions tax in connection with this
activity of the petitioner, though an instrumentality of a State,
does not violate the Federal Constitution. Pp.
338 U. S.
419-420.
172 F.2d 885 affirmed.
Page 338 U. S. 412
In a suit for refund of penalties assessed for failure to
collect federal admissions tax, the District Court entered judgment
for petitioner. 76 F. Supp. 924. The Court of Appeals reversed. 172
F.2d 885. This Court granted certiorari. 37 U.S. 937.
Affirmed, p.
338 U. S.
420.
MR. JUSTICE CLARK delivered the opinion of the Court.
Section 1700(a)(1) of the Internal Revenue Code, as amended,
provides for the imposition, except as to certain classes of
persons under circumstances not important here, of "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." [
Footnote 1]
Paragraph (2) of the subsection declares that the tax "shall be
paid by the person paying for such admission." And § 1715 requires
that
"Every person receiving any payments for admission . . . subject
to the tax imposed by section 1700 . . . shall collect the amount
thereof from the person making such payments."
This suit, brought to recover penalties paid by petitioner for
noncollection of federal admissions tax, presents two questions for
determination: whether § 1700(a) is applicable to paid admittances
to a bathing beach operated without purpose of gain by a local park
district of Illinois; and, if the Code provision is to be so
interpreted,
Page 338 U. S. 413
whether the imposition of admissions tax in connection with such
state activity is within the constitutional power of Congress.
Petitioner is Wilmette Park District, a body politic and
corporate located within the Village of Wilmette, Cook County,
Illinois. Organized and administered pursuant to Illinois statutes,
the District includes within its jurisdiction four park areas. The
largest, Washington Park, extends for approximately three-fourths
of a mile along Lake Michigan, and was acquired partly by grant
from the Illinois, partly by purchase, and partly by exercise of
the power of eminent domain. At the north end of Washington Park,
petitioner has operated a public bathing beach during the summer
months for many years, under authority conferred by the Illinois
Legislature. The beach has been used primarily by residents of the
District, but also has been open to nonresidents.
Among the facilities which the District provided at the beach
during the period under review were a bath house, automobile
parking area, lifesaving equipment, floodlighting, drinking
fountains, showers, spectator benches, bicycle racks, first aid,
and supplies. The operation and maintenance of the area and its
various services were solely by the District, which employed the
necessary personnel.
Petitioner charged all persons for admittance to the beach. Its
charges were of two types: a daily fee of fifty cents on weekdays
and one dollar on Saturdays, Sundays, and holidays, for which no
ticket was issued, and a flat rate for a season ticket which could
be purchased on an individual or family basis. These charges were
made to cover the expense of maintenance and operation of the beach
and of some capital improvements. Over the years, the charges were
intended merely to approximate these costs, and not to produce net
income or profit to petitioner; during the period 1940-1944, the
accounts of the beach,
Page 338 U. S. 414
maintained on a cash receipts and disbursements basis, reflected
an excess of receipts over expenditures of $42.11.
In July, 1941, the Collector notified petitioner to collect a
tax of 10 percent on all tickets to the beach sold on or after July
25 of that year. Petitioner had not previously collected such
taxes, and it refused to do so after the Collector's notice.
Subsequently the Commissioner, under § 1718 of the Code, assessed,
over petitioner's protest, penalties in the amount of the tax which
the Commissioner claimed should have been collected under § 1700(a)
from July 25, 1941 through 1945, plus interest and sums due under §
3655(b) of the Code for failure to pay the tax on demand. These
penalties amounted to $6,139.93 and were paid out of petitioner's
general funds raised by property taxes.
Petitioner filed timely claims for refund which were rejected,
and, in 1946, brought this suit against the Collector. The District
Court entered judgment for petitioner. 76 F. Supp. 924. [
Footnote 2] The Court of Appeals for
the Seventh Circuit reversed. 172 F.2d 885. Because the questions
presented have importance in the administration of the admissions
tax sections of the Code, we granted certiorari. 337 U.S. 937.
First. The Government raises no issue as to
petitioner's standing to sue for refund. As recovery is here sought
of penalties paid from petitioner's general revenue fund after its
failure to collect the tax, we deem petitioner's financial interest
clearly sufficient. [
Footnote
3]
Second. Section 1700(a) is applicable if the charge
made by petitioner for admittance to the beach was,
Page 338 U. S. 415
within the meaning of the statutory language, an "amount paid
for admission to any place."
The words of the provision, when taken in their ordinary and
familiar meaning, reflect a legislative purpose of comprehensive
application. By its terms, the section embraces every payment made
in order to secure admittance to a specific location. And this
purpose of broad application is not less certain because of
anything in the legislative history of the initial adoption of that
language. [
Footnote 4] In this
view, it is unnecessary to consider whether petitioner's beach area
can be distinguished from a "spectator entertainment," for we are
unable to accept petitioner's argument that Congress intended in §
1700(a) to tax only admissions to such events. [
Footnote 5]
We think it clear that a beach area may be a "place" in the
sense of § 1700(a)(1). Petitioner's beach park, including the
adjacent shoal waters, was policed and
Page 338 U. S. 416
lighted; the land area was defined, and entrance was through
gates. A payment was made by patrons of the beach as the condition
of admittance to a specific area with definite physical limits.
Thus, the fee which petitioner charged was "paid for admission" to
a "place" as those terms are used in § 1700(a)(1). [
Footnote 6]
We cannot agree with petitioner's suggestion that Congress
intended to exempt from tax admissions to any activity not
conducted for gain. Section 1701 of the Code did allow certain
exemptions prior to their termination on October 1, 1941 pursuant
to the Revenue Act of 1941, § 541(b), 55 Stat. 687, 710. In § 1701,
Congress exempted admissions to certain classes of events and
admissions all the proceeds of which inured exclusively to the
benefit of designated classes of persons or organizations. But
since Congress did not exempt all activities not for profit, as it
readily might have done, it appears that admissions to such
activities are not, for that reason, outside the admissions tax
scheme.
Exmoor Country Club v. United States, 119 F.2d 961
(1941).
Nor is there greater force in petitioner's contention that the
admissions tax was not intended to apply in the case of activities
conducted by a municipality. In interpreting federal revenue
measures expressed in terms of general application, this Court has
ordinarily found them operative in the case of state activities
even though States were not expressly indicated as subjects of tax.
See concurring opinion in
New York v. United
States, 326 U. S. 572,
326 U. S. 584
and n. 3 (1946). And in
Allen v. Regents of the
University
Page 338 U. S. 417
System of Georgia, 304 U. S. 439
(1938), it was decided that the admissions tax law was applicable
in connection with activities carried on by an agency of a State,
although it does not appear that the issue of legislative purpose
was there disputed. However, we are unable to discover that there
has been any design to exempt admissions to municipally conducted
activities. [
Footnote 7] We
regard the interpretative issue as controlled by a long continued
administrative construction, expressly denying such exemption,
[
Footnote 8] which has been
followed by repeated reenactment
Page 338 U. S. 418
of the relevant language without change. [
Footnote 9]
Cf. Helvering v. Winmill,
305 U. S. 79
(1938).
Finally, § 1700(a)(1) is not rendered inapplicable because beach
patrons make use of a beach and its facilities, thus affording
characterization of the admission fee as a "use charge." Few if any
admissions taxable under § 1700(a) are not accompanied by a use of
the property or equipment to which the admittee's license extends.
Although table accommodations for which a charge is made are
usually thought of as objects of a patron's use, yet Congress, in §
1704 of the Code, has declared that, for purposes of the admissions
tax law, a charge for their use must be treated as a charge for
admission, and not as a rental charge. A similar result must obtain
when payment is prerequisite, as it was at petitioner's beach, to
both admission to and use of a specific area.
Chimney Rock Co.
v. United States, 63 Ct.Cl. 660 (1927),
cert. denied,
275 U.S. 552 (1927);
Twin Falls Natatorium v. United
States, 22 F.2d 308
(1927). [
Footnote 10]
The trial court, in allowing judgment for petitioner in view of
the use made of the beach, considered the fee a "use tax." But if
there is no tax exemption for admissions to a municipally conducted
activity, then a municipality may not escape tax by claiming that
its admission fee is a "use tax" when a similar private business
could not advance such claim. Nor does it matter that petitioner's
authority to make any charge to beach patrons
Page 338 U. S. 419
is derived from a statute which contemplates a charge for "use."
Ill.Rev.Stat. c. 105, § 8-7d (1947). The application of the federal
admissions tax statute is not controlled by the characterization of
petitioner's fee by local law.
Cf. Morgan v. Commissioner,
309 U. S. 78,
309 U. S. 81
(1940).
We conclude that § 1700(a) is applicable.
Third. The constitutionality of admissions tax levied
in connection with an activity of a state instrumentality was
before this Court in
Allen v. Regents of the University System
of Georgia, 304 U. S. 439
(1938). We there found no constitutional inhibition against a
nondiscriminatory imposition of such tax on admissions to an
athletic exhibition conducted in connection with a state
educational administration and in the performance of a governmental
function.
The
Allen decision followed soon after
Helvering v.
Gerhardt, 304 U. S. 405
(1938), which declared two principles limiting state immunity from
federal taxation.
Id. at
304 U. S. 419.
The first of these, invoked in the
Allen decision, was
dependent upon the nature of the function being performed by the
state agency and excluded from immunity such activities as might be
thought not essential for the preservation of state government. We
need not consider here the applicability of that doctrine, for the
petitioner's assertion of immunity must be rejected on the second
restrictive principle reaffirmed in the
Gerhardt decision.
This
"principle, exemplified by those cases where the tax laid upon
individuals affects the state only as the burden is passed on to it
by the taxpayer, forbids recognition of the immunity when the
burden on the state is so speculative and uncertain that, if
allowed, it would restrict the federal taxing power without
affording any corresponding tangible protection to the state
government."
304 U.S. at
304 U. S.
419-420. According to this principle, the state "is not
necessarily protected from a tax which well may be
substantially
Page 338 U. S. 420
or entirely absorbed by private persons."
Id. at
304 U. S.
420.
While the
Allen decision assumed that the admissions
tax there imposed was a direct burden on the State, that assumption
was required only for the purpose of considering the first
principle of limitation of immunity as formulated in the
Gerhardt case. Such an assumption need not be made here.
It is true, of course, that, unless there is a shift in demand for
admissions to petitioner's beach, imposition of the tax may to an
undeterminable extent adversely affect the volume of admissions.
[
Footnote 11] Insofar as
this occurs, the services of the District will be less widely
available, and its revenues from beach admissions will be reduced.
But admissions tax, which is "paid by the person paying for such
admission," is so imposed as to facilitate absorption by patrons of
the beach, rather than by the District, and we have no evidence
that the District will be forced to absorb the tax in order to
maintain the volume of its revenues and the availability of its
benefits.
Cf. Metcalf & Eddy v. Mitchell, 269 U.
S. 514,
269 U. S. 526
(1926).
"The mere fact that the economic burden of such taxes may be
passed on to a state government, and thus increase to some extent,
here wholly conjectural, the expense of its operation, infringes no
constitutional immunity. Such burdens are but normal incidents of
the organization within the same territory of two governments, each
possessed of the taxing power."
Helvering v. Gerhardt, supra, 304 U.S. at
304 U. S.
422.
As it follows that there is no constitutional objection to the
tax penalties assessed against petitioner, the decision of the
Court of Appeals must be
Affirmed.
MR. JUSTICE DOUGLAS and MR. JUSTICE MINTON took no part in the
consideration or decision of this case.
[
Footnote 1]
A war tax rate of 1 cent for each 5 cents or major fraction
thereof has been in effect since April 1, 1944, pursuant to Revenue
Act of 1943, § 302(a), 58 Stat. 21, 61, Act Feb. 25, 1944.
[
Footnote 2]
The District Court allowed recovery only of payments made since
January 1, 1945, when respondent took office as Collector. These
payments were based on petitioner's operations after October 1,
1941, through 1945. Prior to January 1, 1945, petitioner paid
$57.20 on the basis of operations from July 25, 1941, to October 1,
1941.
[
Footnote 3]
See 42 Ill.L.Rev. 818, 819-820 (1948).
[
Footnote 4]
The Report of the House Committee on Ways and Means relating to
the War Revenue Act of 1917
"recommended that this tax be imposed upon all places to which
admission is charged, such as motion picture shows, theaters,
circuses, entertainments, cabarets, ball games, athletic games,
etc., but not upon admissions all the proceeds of which will go
exclusively to the benefit of religious or charitable institutions
or for agricultural purposes."
H.R.Rep. No.45, 65th Cong., 1st Sess. 8 (1917).
See 55
Cong.Rec. 2148 (1917).
[
Footnote 5]
In the admissions tax provisions of the Code, words restricting
the imposition of tax to certain classes of places appear only in
subsections other than (a) of § 1700. Section 1700(b) imposes a tax
of 11 percent on the permanent use or lease of boxes or seats "in
an opera house or any place of amusement;" such tax is in lieu of
that provided for under § 1700(a). Section 1700(c) imposes on the
sale outside box offices, of tickets to "theaters, operas, and
other places of amusement" a tax of 11 percent of the price in
excess of the box office price; such tax is in addition to the tax
imposed by § 1700(a). Section 1700(d) imposes a tax of 50 percent
on the amount of sales in excess of regular price by the management
of "any opera house, theater, or other place of amusement." Section
1700(e) imposes a tax of 5 percent on amounts paid for admission,
refreshment, service, or merchandise, "at any roof garden, cabaret,
or other similar place furnishing a public performance for profit;"
in such cases, no tax may be imposed under § 1700(a).
Compare Exmoor Country Club v. United States, 119 F.2d
961 (1941);
Twin Falls Natatorium v. United
States, 22 F.2d 308
(1927);
United States v. Koller, 287 F. 418 (1921).
[
Footnote 6]
Accord: Dashow v. Harrison, 87 F. Supp. 553 (1946).
[
Footnote 7]
Although an exemption was allowed by § 1701 of the Internal
Revenue Code prior to October 1, 1941, of
"admissions all the proceeds of which inure . . . exclusively to
the benefit of . . . societies or organizations conducted for the
sole purpose . . . of improving any city, town, village, or other
municipality,"
we need not determine whether the exemption was properly
interpreted as inapplicable to activities conducted by a municipal
corporation.
See Treas.Reg. 43 (1928 Ed.) art. 22;
id. (1932 Ed.) art. 22;
id. (1940 Ed.) § 101.25.
The provision became inapplicable prior to the period for which
petitioner made payments which could be recovered against the
present respondent.
See note 2 supra.
Petitioner has argued that the specific exemption benefiting
municipal improvement societies was intended to afford them the
same exemption which Congress thought applied to municipal
corporations; thus, it is urged, repeal of the societies' exemption
still would leave the exemption in the case of municipally
conducted activities. If Congress assumed that any such municipal
corporation exemption existed by implication, it seems likely that
it did so because of constitutional considerations which we notice
hereafter, and not because of a belief or purpose that the tax was
not applicable to activities conducted by any public agency. Thus,
Congress, in adopting 49 Stat. 1757, 1792, Act June 22, 1936 and 55
Stat. 303, 350, June 28, 1941, apparently assumed that an express
exemption was necessary in order to withdraw admissions to National
Parks from the tax statute.
Cf. 55 Stat. 687, 710, Sept.
20, 1941, terminating such exemptions of park admissions.
[
Footnote 8]
Treas.Reg. 43 (1919 Ed. Part 1) art. 42;
id. (1921 Ed.
Part 1) art 42;
id. (1922 Ed. Part 1) art. 26;
id. (1924 Ed. Part 1) art. 26;
id. (1926 Ed. Part
1) art. 26;
id. (1928 Ed.) art. 24;
id. (1932
Ed.) art. 24;
id. (1940 Ed.) § 101.27;
id. (1941
Ed.) § 101.16.
[
Footnote 9]
Revenue Act of 1918, § 800, 40 Stat. 1057, 1120; Revenue Act of
1921, § 800, 42 Stat. 227, 289; Revenue Act of 1924, § 500, 43
Stat. 253, 320; Revenue Act of 1926, § 500, 44 Stat. 9, 91; Revenue
Act of 1928, § 411, 45 Stat. 791, 863; Revenue Act of 1932, § 711,
47 Stat. 169, 271; Pub.Res.No.36, June 28, 1935, 49 Stat. 431;
I.R.C. §§ 1700, 1701 (1939); Revenue Act of 1941, § 541, 55 Stat.
687, 710.
[
Footnote 10]
See Huguenot Yacht Club v. United States, 32 F. Supp.
387, 388 (1940); Lent, The Admissions Tax, 1 Nat.Tax J. 31, 35-36
(1948); 61 Harv.L.Rev. 894 (1948).
[
Footnote 11]
See Lent,
note
10 supra at 40-42.