Busey v. Deshler Hotel Co.

SIMONS, Before ALLEN, MAR- and TIN, Judges. Circuit MARTIN, Judge. Circuit original cause, On the hearing of this judgment the district court in favor appellee taxpayer of the order, was affirmed on fact, inasmuch as the opinion conclusions of law and the dis- judge trict made clear the correctness of the decision below. entry affirmance, After of the order of appellant presented supplemental memo- randa, embracing legislative history of the pertinent appertaining Revenue Act and treasury regulations examples pre- and viously Upon application submitted. for rehearing, previous decision was with- drawn, pending further consideration. After weighing supplemental data and arguments appellant, the new the ma- jority original of the court adheres to the unanimous decision that the district court should be affirmed. judgment, That from which the Col- lector of Internal Revenue appealed, has refund, interest, awarded penal- amounting $6,056.70

ties to collected from appellee under 1114(d) Sec. of the Revenue Int.Rev.Acts, Act of page U.S.C.A. penalties 325. These had been assessed and protest appellee, collected under for failure company collect and account for taxes on admissions to one its dining rooms. The insistence appellant was, is, and the taxes properly pur- were assessed collected (5) 500(a) suant to Sec. of the Revenue Int.Rev.Acts, Act of 26 U.S.C.A. page imposes “tax cents 1% for each 10 cents or thereof of fraction paid the amount admission to performance roof or other similar which the or in refreshment, service, merchandise; paid amount for such admission to be per deemed to be centum of the amount and mer- Clark, Jr., chandise; Atty. Gen., paid by Samuel O. Asst. tax to be Key, Monarch, paying refreshment, service, L. Sewall Fred son for such J. J. Neuland, Sp. Gen., Atty. Assts. merchandise.” pro- Leo The statute further Crawford, Ohio, Dayton, Calvin vided that “where the amount Folkerth, Columbus, Ohio, H. for admission is less, 50 cents or no tax shall Justin appellant. imposed.” increase general There was no waived, the jury being district A food, and bever- facts, prices charged service sup- stipulated the case tried perma- after the newspaper ages in the Ionian Room adver- plemented exhibited and band showing nent installation menus tisements numerous were the same prices charged the music. prices charged and drink in for food Sundays days. appellee’s on as week one- on dining rooms of three Columbus, Ohio. thousand-room hotel in the stipulated record It was into adopted agreed statement facts was Columbus, Ohio, called if ten residents of in its find- and included by the district court testified, witnesses, have as briefly be ings. findings fact will These principal patronizing the their reason for surveyed. dancing, and that music and Ionian for was in as the room well known Columbus was large, in dining three rooms the first- dancing. place popular for a called, operated by appellee hotel were class findings of fact Among important the Spanish the respectively, Sapphire, the and following: Room, the district were the Ionian. The Ionian known also the Room, artistically Grill was an deco- as the rated, prices during “13. That food the for popular-priced restau- ceilinged, low supper the music late hours while was basement. Its in the hotel rant located playing, substantially the same as the were seating capacity approximately was 300 prices during for food the luncheon hours early late, people kept open and it was and playing. music in when no was That some week, days the a for service of seven instances, price the an article was breakfast, lunch, dinner, supper, late and slightly higher during the hours luncheon Quick service was beverages. alcoholic hours; supper than at the late in aijd some featured. instances, price higher the of an article was supper at the late than at hours the lunch- Continuously since the hotel has eon hours. provided play an orchestra or band to dance prices “14. That food Room, during the special in the Ionian but music no playing hours the music dinner when was provided. Dancing floor has been dance prices exactly during were the same the thirty-six possible made for some was the luncheon hours when no music was simultaneously by the sons removal of playing. perhaps ten tables foot platform, in space front of the orchestra prices That beverages, “15. the both space grill floor Ionian the total the room non-alcoholic, alcoholic and con- remained being square approximately 4000 feet. At through day stant all the hours of and times, a member of the orchestra would night. solo, furnish an instrumental or a vocalist charge “16. That there no was for ad- lyrics sing member would dance mission to the Ionian Room included in the played being number the orchestra. prices or plat- Neither orchestra nor left the soloists merchandise, guise. or in other dancing There was form. no music on performances “17. That said in the Sundays, days dancing and on secular was performances. Room Ionian were periods P. M. limited from 6:00 to 8:30 “18. That said were not M., 'P. and from 10:00 M. to 1:00 A. M. P. profit.” performances for special charge No door and no cover fact, findings supported Based its on charge entry was exacted for minimum evidence, preponderance the dis- Indeed, Ionian into Room. adjudged penalties trict court that the had charge made was for whatever food or improperly ap- been assessed that the purchase. drink entrants chose to If pellee company was entitled to re- purchase made, charge was unlawfully cover taxes exacted made; persons dining Sapphire in the collector. Spanish permitted use, Rooms were Applying principle of Federal Rules charge, dancing without facilities of the Procedure, Civil U.S.C.A. Ionian Room. 723c, following section of fact a district court shall not be set aside un- prices The scale of for food and refresh- clearly erroneous, this court less in its- ments was lower the Ionian Room than of affirmance recited: order rooms, the other dining two which were “ * * * exclusive appearing more and featured And better it that while dignified employs appellee specified more service. an orchestra lobby dancing surround- gives public performances in its floor times which tains ed its appellee’s the Ionian tables and serves refreshments to restaurant called Room, patrons during hours. No does not conduct in charge dancing. or oth- is made for This is a Ionian Room a roof entertainment; public performance profit case er similar and that where wholly district as a fact that there is the amount for admission court found price paid re- direct admissions no Ionian freshments, tax, Room; and there there- for admis- will fore, provisions under the Act.” sion is either included in these food, the service, refreshment or it im- example The third states performances given and that dancing facilities material whether furnished are room or purview 500(a) (5) within the Sec. of of lobby of the hotel. 1926, appearing it Revenue Act of It is of contended that the amply record such find- sustains district court overthrew ings; charged those of Revenue Statute “It is ordered that the of the with its administration. be, is, hereby district court firmed.” and it af- existing situa bring an In order to statute, purview taxing aof tion within the opinion majority The of the is of and ex treasury regulations interpretative proposition appel- that no new adduced permitted to strain amples should not be rehearing gainsays lant on the correctness breaking coverage the statute to a the point forpner of our decision. the case. the facts of with Statute, language of the Revenue binding, interpretative become To quoted supra, plain unambiguous, is reasonable and regulations must be any public per- applying in terms Congress, intention of furtherance of the profit garden, formance for at a roof arbitrary Acts. An as evidenced its cabaret, entertainment, other similar or In regulation the Commissioner of wholly is which the for admission is not enforceable. Where ternal Revenue part inor included in the plain language taxing is statute refreshment, service, or merchandise. unambiguous, there is no occasion for It is contended that the Collector interpretative promulgations resort and instrumental vocal of the soloist Treasury Department. Neither the ad orchestra, patrons and the nor the courts ministrative officers Room, in the Ionian constituted “other enlarge scope of supply or omissions similar entertainment” within the definition States, the statute. See Iselin v. United Treasury 43, Ed., Regulation 1932 Arti- 245, 250, 251, 248, L. 270 U.S. Ed. 566. 46 S.Ct. 11, provides: “‘Any public per- which cle profit any at formance roof is not inconsistent This doctrine similar entertainment’ in- or other practical that the rule with the settled every public cludes vaudeville or other statute, ambiguous which terpretation of an way performance or diversion in the charged by officials acted has been singing, acting, dancing, declamation or administration, should not be dis with its or instrumental either with without or other Brew except cogent reasons. turbed music, profit conducted for the of the 336, 327, Gage, 280 S.Ct ster v. U.S. by professionals, amateurs, management or 115, L.Ed. 457. auspices patrons manage- under ment, in connection with the service of by appellant Much stress is laid selling food or other refreshment or by Congress upon the reenactment hotel, any at any merchandise room in under consideration after statute restaurant, public place. hall other or regu the Commissioner promulgation Every entertainment so form of conducted substantially equivalent to those lations except is included instrumental music un- period during the with which we are effect accompanied by any form of enter- other pointed It is out that concerned. tainment.” 4, announced December Decision 1917, pertaining to the statute from argument Collector buttresses his derived, examples 500(a) (5) embraced the under Article 11 Sec. definitions, Treasury Regulations, example following the first sentence the second whereof incorporated 800(a) whereof Sec. reads: “A hotel main- into certain (6) suggested Act has Stat. been that “it would serve Revenue substantially the the retained with cause income if the taxation court’s phraseology same (Helvering decision in this 500(a) (5) Sec. case v. Wil- Revenue shire supra) Act 1926: Oil could broadened so as to further restrict the effect of “Twenty percent paid amount statutory artificial rules of construction.” refreshments, etc., merchandise, Taxation, Merten’s Law of Income including any sum and tables seats Supplement, page Cumulative foot- occupied, reserved at note 4(c). formance for cabaret or other similar to which the eventuality apparently Such has been for admission Douglas, forecast. Mr. who wrote Justice paid, amount shall be regarded so case, opinion supra, in the Wilshire and deemed to he for admission to Helvering Reynolds, declared in * * * performance. 61 S.Ct. 85 L.Ed. A.L.R. of such cases hotel, restaurant, “A affording, hall as United States v. Dakota-Montana Oil connection with the service of Company, supra, is no more an aid than food, merchandise, entertainment and, in statutory construction while useful patrons dancing by form of included.” resolving ambiguities, at times in is insisted that con administrative prior does not mean that the construction must struction be deemed to have received has become so the embedded in law that approval legislative the by reenactment of only Congress change. can effect a statutory provision a without material change. concluding In paragraph opin- the of United States v. the Dakota-Montana 466, Co., Helvering ion in 459, 435, 288 v. Credit Alliance Oil U.S. 53 Cor- S.Ct. 77 893; poration, 989, 992, Helvering Reynolds —, L.Ed. 62 S.Ct. 86 R. L.Ed. J. 110, Co., 27, 1942, 116, April delivered Tobacco 306 on Mr. U.S. 59 S.Ct. Justice Roberts, 423, opinion 83 But in who wrote L.Ed. 536. Biddle v. Com the in Helver- ing Reynolds Co., Revenue, supra, v. R. missioner of Internal Tobacco J. 582, 379, 383, 431, said: “In view 58 of what we S.Ct. 82 have said as L.Ed. plain present meaning to the of subsection (f) the Chief said: “Where [26 Justice Int.Rev.Acts, plain 838], U.S.C.A. subsequent page the law is the re-enact we think complexity that adop of a no ment statute not constitute confusion is dis- does only that the regulation tion of its coverable and not administrative construction.” contradictory was plain terms of the Helvering Co., In v. Wilshire Oil 308 U. attempted subsection but sup- to add a 90, 100, 18, 24, 60 84 S. S.Ct. L.Ed. the plementary legislative provision, which opinion writer oft-repeated said: “The by could have been Congress. enacted that administrative statement construction hold, therefore, We that the court below approval legislative by receives reenact right refusing was in give to effect the to statutory provision, ment without regulation.” change (United material States v. Dakota- * * * dissenting justices three based their Co,, supra) Oil Montana does upon ground non-concurrence that the regulation interpreting mean that a not a treasury regulation ambiguities resolved be- provision one into act frozen becomes Act, of the Revenue tween sections was merely act reenactment another interpretative regulation a valid therefore provision, so that that administrative proper exercise the rule-making a and authority. interpretation changed prospec cannot In the Act Revenue which we through tively appropriate exercise of rule- upon construe, called to have been there powers.” making ambiguities. are no pro- the reenactment a If Shanley Co., does not freeze into think that Herbert v. the Act an We vision interpretation pre- so as S.Ct. L.Ed. administrative to U.S. Commissioner, prospective rule-making power upon relied has no clude Revenue, bearing merely of Internal here. That decision the Commissioner true of why infringement rights should an administrative found unambiguous copyrighted composi- Revenue Act become owner of a musical of an law, tion, incapable played by an orchestra in refrigerated being melted hotel a statute, money judicial where was construction of the restaurant a collected itself, contrariwise in- at the door. The administrative observations Mr. terpretation (242 op. ? Holmes U.S. Justice performances In its view could inapplicable, 511) seem S.Ct. Regula- not have been direct Treasury a for the reason that charge that no was the reason excepts orches- tion, 11, expressly Article expense the enter- more, made and that tainment was music, the defini- tral without in- expense an overhead profit.” “public tion class to the business in which cidental appellee deliberations have been aided our We engaged, think that was I opinion district court a well-reasoned law. District Court as matter of erred Hotel in United States v. Broadmoor record show that While the does not facts, though dif- 30 F.2d where expense allocated non-essentials, general ferentiable bear overhead, general suggested by the similarity we have to the situation which Court, is, if it remains District the fact confronted. part of the food contributes 500(a) (5) summarize: Sec. To the maintenance of the orchestra. plain and un the Revenue Act of charges for services rendered in hotel ambiguous, leaving appropriate occa to, financially suc- intended and in scope enlargement sion for of its in ex- defray the overhead hotel do cessful terpretative regulations of the penses. basis here for There Ionian, Department. The Grill Room provision or- of an conclusion company has been gift space was chestra the district court abundant found I conclude from the hotel. cannot matter evidence fact a roof to have been as a popularity which enhanced or other was room and advertised of regularly during to which the similar period involved admission was for cluded service, published newspapers general circulation the price Ohio, Columbus, free. finding This merchandise. in different involved While a statute was the fact is deemed determinative of issue Shanley 591, 37 S. Herbert v. involved. question the be Ct. Accordingly, the the district of for identical decision was fore the court court is affirmed. in presented the instant case with that in the Cir it called for examination of that ALLEN, Judge (dissenting). Circuit per Appeals’ conclusion that cuit Court of practically is a case of This first im- compositions in a of musical formances pression, the involving construction of per an constitute not room did the important section of internal revenue profit. furnished Music was formances for wise, I It seems since times, therefore law.1 can- only charges but at certain my agree time, with the conclusion any not of col- at were collected my the leagues, to state reasons for dissent. charges the for was made in difference fur music was times food at the when the statute for The construction of which Holmes, speaking for nished. Mr. contends, my opinion, in is appellant rea- Justice the that conclusion holding the court and supported logical, and is not sonable Appeals un the Court of of Circuit only by administrative construc- consistent tenable, performances pointed out that the period, long but also the over tion “eleemosynary,” were but rather were not history the enactment. While legislative part the the total for which upon based fact the evidential tersely “If music did paid. he said: As evidence, the ultimate find- uncontroverted up. pays, it pay, it If not it there the District Court that was no ings of public’s pays pocket. the Whether out the for admission and that charge not, employing pays the it or not were the Ionian Room formances enough.” profit, it is and that questions law and are profit involve case, contrary ap- Applying the this to the instant both the statute and to finding require a Supreme the Court. the uncontradicted plicable decision of facts large per- A v. Broadmoor Hotel service of afternoon tea. In United States centage dancing guests Co., D.C.Colo., oth- were not F.2d tlie those purchase construing section, hotel, did not refresh- the facts of the er ease pay dancing. ments, held or case. was there otherwise the differentiate soloists, did not be collected The music include either tax could not instrumental or vocal. furnished hotel which resort dancing in with the connection music for imposed. cases in examples These which a tax is profit. were part made are included in and conclusion to that no for admission regulations situations presented and describe prices the Ionian Room was included in substantially identical to paid for food and refreshment is likewise here. upon premise based the untenable entertainment was free. Since the enter- Approval District conclu- Court’s profit, cover, tainment was for and no ad- sion the consistent and uniform overthrows made, mission special or other charge was interpretation adopted by charged those (cid:127) the charge entirely in- admission was provi- with the administration these tax price cluded in the for such services. pro- pertinent The substance sions. Therefore squarely applies, the statute present regulations visions was an- twenty per cent charges made is by Treasury nounced December conclusively deemed to be the admission promulgated by Decision 2603 which was charge. of Internal Revenue with Commissioner I think approval Secretary, pursuant that the entertainment furnished the Ionian clearly express Room is authority covered 700 of of Section the statute. The District Court the Revenue Act 318. made no Stat. finding provided conclusion as to whether the Decision 2603 in sub- twenty entertainment comes requirement per within “at stance paid cent of amount being refreshment, etc., garden, any public roof at performance other similar entertainment.” cabaret or While operate does not a other similar entertainment to roof and since it has floor show for admission is it operate does not cabaret within the so “shall be amount dictionary definition, performance regarded and deemed to be ad- the Ionian Room is phrase covered performance,” pro- mission also * * * “other similar entertainment.” The affording statute vided that “A hotel clearly provides for a tax admissions in connection with the service of refresh- places precisely that are ment, food, merchandise, conducted entertainment gardens Similarity roof or cabarets. patrons in the form every respect certainly unnecessary. included.” performance is similar to that a roof This administrative was cit- construction garden or cabaret because of the fact that report prepared by ed in the the Commit- instrumental and vocal solo Ways tee on and Means the House of given patrons, the entertainment of Representatives upon the bill which became provision and there is for dancing. This pointed Act 1918. It was Revenue supported by conclusion is portion 767, report (H.R. out in this Cong., No. 65th applicable Treasury Regulation which is Sess., p. 32) that the 2d quoted majority in the opinion (Treas.Reg. Department general determined had that a 43, ed., 1932 11). Art. be laid the effect down to that could stipulated show, my The opinion, facts twenty per cent of the amount performance, that precise in the lan- refreshment, repre- service or merchandise guage Article 11 regulation, of the is a approximately sented the amount covered public entertainment or diversion in the price paid by the total which could be at- way singing, numbers, solo instrumental tributable to admission and that dancing music, with instrumental con- treasury ruling the bill embodied management by ducted for the professionals of the determining the tax a basis for auspices under the of the where the admission management and in connection with the in the included It is evident refreshment. selling service of food and other refresh- Congress had brought thus ment in the room. the or- Since its attention the same time in to same by unaccompanied chestra music is not Treasury Decision the administrative other exception form of hotel, “a interpretation restaurant or apply. stated in Article 11 does affording, in hall connection with the serv- Examples food, merchandise, 11, 2 and 3 under Article ice of entertainment cited majority opinion, by in the in the form of describe factual phrase covering patrons” instances charge was included both the admission- “simi- entertainment,” change feature and lar but material the nature of entertain- pertinent provi- ment covered the section was made in the to illustrate 19á sion legis so The fact that the there is forbids construed. no rule of law which history of the supports lative section the use aid to a determination interpretation meaning Congress administrative provides of the statute intended independent adopt be v. an reason Co. available. Boston Sand & Gravel 52, ing States, 41, 48, Estate United construction. of Sanford U.S. 49 S.Ct. 278 Dickerson, 39, 44, Commissioner, 170; v. 73 308 U.S. S.Ct. L.Ed. 60 States v. United 51, 20; supra, 562, 1034, Apex Hosiery 84 v. 84 page L.Ed. 310 60 Co. U.S. S.Ct. Leader, 469, 489, 982, Acceptance 84 310 U.S. 60 L.Ed. 1356. “literal S.Ct. 1311, 1044; terpretation L.Ed. 128 United dogma A.L.R. States which withholds Ass’ns, Inc., Trucking American 310 U. courts available information reach v. 534, 1059, seq., ing S. 1345; 546 et 60 S.Ct. 84 correct conclusion” increases Dickerson, danger, United U. present, States v. 310 ever con the courts’ 554, 1034, 1356; 562, S. legislative 60 84 L.Ed. clusion S.Ct. as to will 600, Corp., Cooper unconsciously United 611, 613, 312 States v. U.S. judges’ own influenced 1071; 742, 61 85 L.Ed. views or legislative S.Ct. factors not considered Wrightwood Co., Dairy United States v. body. United Amer States v. 110, 523, 315 U.S. Ass’ns, 62 S.Ct. Inc., Trucking supra, ican 310 U. L.Ed. 726. page seq., 1064, S. page et S.Ct. provisions The bill with these was enact- L.Ed. 1345. subsequently ed into law and’was reenact- The Court District 1924, ined the Revenue Acts 1921 and should be reversed. with change language. definitive 500(a) Section re- (5) 1926 Act tained phraseology. identical stat- explicit ute is not so as to leave room elucidation. Under circumstances it is “Congress held that must be taken to have approved the administrative con- thereby struction have it the Helvering Reynolds force of law.” v. R. J. Co., 110, 115, Tobacco U.S. S.Ct. NEW YORK CREDIT MEN’S v. ASS’N 536; 83 L.Ed. United States v. SILBERKLEIT. Dakota-Montana Oil S.Ct. 288 U.S. No. 308. Helvering 77 L.Ed. 893. Cf. Reynolds, 61 S.Ct. Appeals, Circuit Court of Second Circuit. 85 L.Ed. 134 A.L.R. 1155. July 1942. majority of the court in effect con Clarify Opinion On Motion to interpretation cedes that the of the statute July 16, 1942. contends is at variance interpretation consistently with adhered charged those its administra ordinarily

tion. This respect. great be entitled to Edwards’ Darby, Lessee v. 12 Wheat. 6 L. 603; Gage, Ed. 336, Brewster S.Ct. 457. The vari justified by majority ance is ground that the statute is so clear and un ambiguous as to leave no room for ex trinsic aids to construction. In of statutes the func- simply tion of the courts to construe language give used so effect to Congress the intention of and there is no persuasive more of a statute than the words evidence of the which the Legislature expression give undertook its wishes. But no matter how clear the

meaning of words as used a statute appear upon examination, independent

Case Details

Case Name: Busey v. Deshler Hotel Co.

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Jul 8, 1942

Citation: 130 F.2d 187

Docket Number: 8982

Court Abbreviation: 6th Cir.