The Milwaukee Symphony is trying to make a case to the Wisconsin Department of Revenue that its performances are not entertaining. That is, they’re asking for a refund of the sales tax they have paid against ticket sales for the past four years, on the grounds that their performances are education not entertainment, and therefore exempt.
It’s an interesting end-run around Wisconsin’s lack of a sales tax exemption on nonprofit performing arts tickets, offered by other states including neighbor Minnesota. But the request and now the appeal led to some rather odd interchanges between the symphony’s attorneys and tax officials.
Tim Schally, the orchestra’s attorney on the case, suggested attending the symphony is more like going to a museum than a basketball game, even comparing the musicians to a utility expense:
“Classical pieces themselves are complex pieces of art,” he said. “Playing the music is like turning the lights on at the art museum.”
On the other side, the Tax Appeals Commission stressed the entertainment and enjoyment of a symphony event in their 79-page ruling:
“While only a small portion of the general population attends classical symphony concerts, for those who do, it is not unreasonable to assume that the concert is an enjoyable, pleasant and relaxing night of entertainment, often combined with other social activities with friends, such as dinners, social gatherings and drinks,” the Appeals Commission ruled. “If concerts were not entertaining, it seems unlikely that so many people would be willing to spend a weekend night or Sunday afternoon to attend.”
To make the case a bit more shakey, some tax officials claim that even if the symphony won it’s request for around $720,000 plus interest, any refund of past taxes would go to the consumers who purchased the tickets, not the symphony.
Either way, a tax authority and a symphony arguing about whether performances are enjoyable or not: priceless.
John Federico says
This has been an issue in Pittsburgh for more than a decade. When the Allegheny County Regional Asset District was established about 12 years ago, a sales tax of 1% went into effect and the amusement tax levied by the City of Pittsburgh was reduced by half, from 10% to 5%. After exhaustive lobbying efforts over the past several years, the nonprofit arts community has won a reduction in the tax from 5% to 2.5% last year and for the current year, it’s been reduced by half again. Both newspapers in town have covered the work of getting the tax reduced.
Neill Archer Roan says
Perhaps there might be some middle ground. I wonder if the orchestra has thought of using the critical reviews the orchestra has received as evidence of a lack of entertainment value. Surely, a bevy of bad reviews about unimaginative playing, poor repertory choices, too-challenging modern music, etc. might help manage the evidence of diminished entertainment value. Or maybe the orchestra has a problem here, maybe they need to tone down their performance quality. Maybe slow some of their tempi? Perhaps reduce dynamic ranges to flatten out the excitement? Maybe only some of the performances (early Beethoven, Mozart, the Brandenburgs, etc.) would be taxable using this argument. Another worthwhile strategy to consider would involve increasing the number of works by Salieri, Telemann, Schoenberg, Hindemith, etc. (Of course I am being terribly unfair to Schoenberg and Hindemith here by including them in a group with Telemann and Salieri, but I digress. You get the point.) Personally, I think this idea has merit. I have watched seasoned orchestral audiences flee this music like safety-conscious hunters from Dick Cheney.
Of course, this is a fine line to walk: making the case against entertainment value by virtue of poor experience quality. I can imagine the confusion that people would feel about experiencing rapture at a particularly bad review (tax breaks) as opposed to the devastating disappointment of a rave (blissful music).
It seems to me that Wisconsin’s problem is not so much an entertaining orchestra as judges that are excessively erudite. Classical music as entertainment? Who could imagine such a preposterous conclusion? Those of us who count ourselves among orchestral music’s legionnaires know that this music is like boiled spinach. It’s good for you and tolerable, too, after one acquires a taste for it.
Maybe Wisconsin should consider importing its judges from states reputed to be more hostile to the entertainment value of symphony orchestras.
Simon Baxter says
I am an indirect tax advisor for Deloitte & Touche LLP in the UK. Nationally, I co-ordinate the issue of VAT (GST/SAUT) exemption for the supply of cultural events such as theatres and symphony orchestras. In the EU, there is an exemption for non-profit making organisations that satisfy certain criteria for the sales of tickets. This has resulted in the refund to such organsations of millions of £’s. None of the criteria for exemption relate to the entertainment value, but to the nature of the performance i.e. it must be cultural in its nature. I would be happy to share my experiences with you to see if there are any arguments you could present in support of the Milwaukee Symphony – of course our legislation doesn’t translate in the US, but there could be some angles you haven’t explored.
Robert Levine says
As a member of the Milwaukee Symphony, I’d like to speak to this issue.
There are only a handful of states that tax admission to symphony concerts. The IRS considers symphony orchestras, as organizations exempt from federal tax under Section 501 (c) (3), to be “organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.” Nothing about entertainment, you’ll notice.
To add insult to injury, there are other non-profit performing arts organizations in Wisconsin that do not pay sales tax. We have a wonderful African dance company in Milwaukee called “Ko-Thi Dancers” that puts on exciting and entertaining programs, but they don’t pay sales tax. How are they different in any substantive respect as an arts organization than the MSO?
Lawyers make the arguments they need to make to help their clients win. Sometimes this involves making claims that are counter-intuitive. Call me dumb, but I’d be happy to be declared non-entertaining by the State of Wisconsin if it would save my employer a few hundred thou every season.
Elizabeth Russell says
This isn’t the only arena in which Wisconsin sales tax has stymied artistic professionals. Many a graphic artist has run into trouble here. If they provide their end product to the client via email, there’s no physical “good” and no Wisconsin sales tax. However, if they give the client a CD or DVD: boom.
Wendy Norris says
Fascinating. And dumb-founding.
Seems there are two ways to go:
1. Another appeal.
Robert Levine’s posting about the lack of equity in the application of sales tax is really troubling!
If the problem is the entertainment vs. education issue (rather than entertainment vs. boredom) then leverage those educational outreach programs into sales tax exemption. It looks like there are quite a few avenues that the MSO pursues. If 35,000 school kids are reached per year, as the website says, and if they’re collaborating with the art museum and other educational and artistic orgs as much as the site would suggest, there’s got to be a strong financial case for sales tax exemption.
2. If you can’t beat ’em, join ’em.
If the city insists on taxing because of the entertainment value, I say, insist that Milwaukee plow that money into amenities that would enhance the experience for attendees and milk the entertainment/tourism argument for all it’s worth.
Demand free or reduced-price parking for employees/patrons, ditto public transport for employees. Lobby for improved city-financed amenities around the Marcus Center.
Develop packages with the Hotel Pfister, Hotel Metro (the Art Museum does this!) and move beyond subscriber coupons with nearby restaurants to special advertised deals for one-time visitors.
Work that entertainment status!
What excellent fodder for a cultural policy research paper!