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City tax on tickets unevenly applied to arts
Friday, September 15, 2000 By Caroline Abels, Post-Gazette Cultural Arts Writer
Legal loopholes allow some arts and cultural organizations to avoid paying the city amusement tax by citing an educational mission or labeling their admission fees as "donations," a Pittsburgh Post-Gazette examination of the tax has found.
Critics say the tax, a 5 percent levy on ticket sales collected from businesses as diverse as sports teams, nightclubs and not-for-profit arts organizations, is unevenly applied. What a group pays depends on its purpose and, surprisingly, whether it even knows of the educational exemption.
The Post-Gazette also found that two of the tax's more obscure requirements -- that the amount of the tax be printed on tickets and posted outside box-office windows -- are all but ignored, largely because arts groups don't know the requirements exist.
Some arts leaders, puzzled by the educational exemption granted some groups but not others, are considering asking for exemptions of their own. If they succeed, the city could lose hundreds of thousands of dollars in revenue. (Most of the $7.7 million generated last year by the tax came from Pittsburgh's sports teams.)
Other arts leaders are considering asking the city to exempt all not-for-profit arts organizations, as many cities, including Philadelphia, have done.
"There's no question the city needs the money," said Mark Weinstein, managing director of Pittsburgh Opera. "But we'd like to find an alternative revenue source and figure out some other way."
Why some don't pay
Nearly all of Pittsburgh's museums, plus the National Aviary and the Pittsburgh Zoo and Aquarium, pay no amusement tax on their admissions because the city believes they serve an educational purpose and are not amusements, according to the city treasurer's office.
The museums are the Senator John Heinz Pittsburgh Regional History Center, the Pittsburgh Children's Museum and the four museums overseen by the Carnegie Institute: Carnegie Museum of Art, Carnegie Museum of Natural History, Carnegie Science Center and The Andy Warhol Museum.
The science center, however, pays tax on its Omnimax theater and laser light shows because they are considered entertainment rather than education. Similarly, the art museum pays on its film and video screenings and the zoo pays on its train and carousel rides.
The Frick Art & Historical Center in Point Breeze pays tax on its tours of Clayton, the Henry Clay Frick mansion, which some arts leaders argue is an educational entity. Frick officials declined to comment for this article.
Phipps Conservatory and Botanical Gardens doesn't pay the tax because it is on city-owned property, according to a conservatory spokesman.
Educational exemptions are allowed because of two Commonwealth Court cases. In 1975, a judge said Indian Echo Caverns, in Dauphin County, offered an educational experience of historical, natural and geological dimensions and therefore could not be defined as an amusement by Derry Township.
In a 1973 case brought against Fort Ligonier by the Ligonier Valley School District, a judge ruled that the "entire theme and display at the museum and fort are geared solely for historical and educational purposes" and were exempt from amusement tax.
Bill Stein, marketing director of the Carnegie Institute, said that when patrons walk into Carnegie museums, they are destined to have an educational experience.
"Our whole reason for being is academic and education-based," he said. "We have no other reason to exist, so everything we do that's mission-related we feel is an educational experience."
Barbara Baker, president of the Pittsburgh Zoo and Aquarium, said the zoo is a living museum that engages in conservation, in addition to offering entertaining rides. Jane Werner, director of the Pittsburgh Children's Museum, said her museum's exhibits are all educational.
Leaders of some performing arts organizations, none of which are exempt, believe the definition of "educational" should include them.
"We are teaching our audience about great classics," said Steven Libman, managing director of Pittsburgh Ballet Theatre. "That is how the performing arts pass along our culture from generation to generation. It is more than mass or popular entertainment."
Libman also said his ballet company runs a school on its premises and oversees a number of educational programs that introduce young people to the art.
Arts leaders also note that not-for-profit arts organizations like theirs are exempt from federal tax on revenues because they are defined by the Internal Revenue Service as educational.
"If the federal government thinks we're an educational organization, why wouldn't the city of Pittsburgh?" asked Van Kaplan, executive director of Pittsburgh Civic Light Opera.
Told that some groups feel they deserve an educational exemption, city Treasurer Richard Fees said: "If someone presents something to us and they can prove they can meet the conditions in the court case, we're not against that."
"If there is a mechanism by which the other organizations have applied for and received this educational status from the city, then I would certainly take advantage of the opportunity," Libman said.
"It's something we at the Public would have to investigate," said Stephen Klein, managing director of Pittsburgh Public Theater. "All the arts institutions could make a good case that what we do certainly has strong educational components."
A number of arts leaders said they did not even know about the educational exemption before being contacted for this story. Fees said the city is not responsible for informing groups about it.
"We don't have the staff to do that," he said.
Ticket fee or 'donation'?
Fees said another reason Carnegie Museum of Art and Carnegie Museum of Natural History do not pay the tax is because admission to the museums is by donation, although it appears that donations are taxable under the amusement tax ordinance.
He said his office sends investigators to the Oakland museums to verify that patrons can enter free of charge.
"They've walked in and said, 'We don't have any money,' and they were allowed to enter," Fees said.
However, a reporter visiting the museums on three different days this summer was told at the admission desks of both museums that the admission price is set at $6 for adults.
Told of this, Fees said, "Well, we haven't done that [sending investigators] in a little while. Maybe we should send [the Carnegie] a letter."
In addition, the word "donation" does not appear on the signs at the Carnegie's admission desks or on its brochures.
The Carnegie Institute's Stein said admission to either museum can be waived if a group calls ahead. Also, the institute provides four free admissions to anyone checking out a guidebook on the institute from any Carnegie library -- a long-standing incentive to let people in for free.
Similarly, Laura Willumsen, executive director of Pittsburgh Center for the Arts in Shadyside, which does not pay the tax because it accepts donations as admission, said no one is denied entry if they do not pay the suggested donation.
The definition of "amusement" in the amusement tax ordinance, which was enacted in 1948, includes "... all other methods of obtaining admission charges, donations, contributions or monetary charges of any character ... in return for other than tangible property."
Aware of this clause, Open Stage Theater advertises a "suggested ticket donation" but still pays the amusement tax. Sue Morris, managing director of the theater, said she once wondered whether the theater could be exempted but was told by the group's treasurer that the tax had to be paid.
A tax that hurts
Technically, the tax is on the ticket buyer, not the arts group, because it's part of the ticket price. But arts groups say the tax forces them to lower their base prices in order to keep tickets affordable.
For example, if a group feels it can only charge $24 per seat because the patron is not willing to pay $25.20 -- the price of the ticket with the 5 percent tax -- the group must lower its base charge to make the ticket come out to $24 with the tax.
"It's a debilitating tax, and it artificially raises ticket prices when one of the major goals of the CLO and of most arts groups is to keep ticket prices as low as possible," Kaplan said.
Some arts managers say if the amusement tax were lowered, they would lower ticket prices to benefit the consumer. Others say they would freeze prices and use the windfall to improve their artistic product.
The amusement tax ordinance requires that the amount of tax the patron is paying be printed on the ticket.
This forced ProArts, a service organization for small- and mid-sized arts groups, to spend $800 and much staff time to buy and install computer software. One of the 26 groups that uses the service had complained that ProArts was not following the ordinance, said Marilyn Coleman, ProArts' executive director.
Although groups that perform in the Downtown cultural district print the tax on their tickets, Coleman said there are "gazillions of groups that don't follow this part of the law." Many groups also fail to post a sign near their box office stating the amount of amusement tax charged, as the city requires.
Fees said the treasurer's office notifies groups if they aren't following the two requirements, but it doesn't punish them.
"If someone is paying their taxes, then for us to haul them into court for that, it just doesn't make sense," Fees said, adding that part of the ordinance is "somewhat archaic."
Arts groups seek relief
Frustrated by the financial burden, members of the Arts Leadership Group have recently contemplated asking the city to exempt all not-for-profit arts groups from the amusement tax.
"So far -- and we're not complete in our analysis -- across the United States we are totally unaware of any city our size or larger that has not exempted its nonprofits from an amusement tax or ticket tax," Weinstein said.
Arts leaders say their challenge is to find an alternative revenue source that can replace the amusement tax revenue for the city, which is strapped with a structural budget deficit of about $22 million. Mayor Murphy told arts groups in the early 1990s that he would be glad to eliminate the tax if replacement money were found, and that's part of why the Regional Asset District was formed in 1995: It allowed the city to reduce the amusement tax from 10 to 5 percent.
Arts leaders stressed that they do not want the city to make educationally exempt groups pay; rather, they hope the city can work with the arts community on finding alternative revenue.
"This is not about wanting the museums to pay," said Gideon Toeplitz, managing director of the Pittsburgh Symphony Orchestra. "The challenge is coming up with another creative source of income for the city."
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