Comptroller of the Treasury v. Clyde's of Chevy Chase, Inc.

CATHELL, Judge. This case arises out of an admissions and amusement tax sought to be levied by the Comptroller of the Treasury, petitioner, against two restaurants, Clyde’s of Chevy Chase, Inc. (Chevy Chase) and Clyde’s of Columbia, Inc. (Columbia). 1 ⁴⁷⁵ Clyde’s received a hearing before a hearing officer on December 8, 1999 to determine the validity of the assessment. On May 5, 2000, the hearing officer upheld petitioner’s assessment and respondent appealed to the Maryland Tax Court. After a November 1, 2000 hearing, the Tax Court issued a written order on November 29, 2000 reversing the hearing officer and denying petitioner’s admissions and amusement tax assessment against respondent.

Petitioner sought judicial review in the Circuit Court for Baltimore City and on August 23, 2001, a hearing was held in front of the Honorable Clifton Gordy. Judge Gordy upheld the Tax Court’s decision in an order dated October 2, 2001. Respondent appealed that decision to the Court of Special Appeals. In an unreported opinion filed on January 7, 2003, that court upheld the Tax Court’s decision in favor of respondent. 2 Petitioner then filed a Petition for Writ of Certiorari with this Court, and, on May 7, 2003, we granted the petition.

Comptroller of the Treasury v. Clyde’s of Chevy Chase, Inc., 374 Md. 358 , 822 A.2d 1224 (2003). Petitioner presents one question for our review: “Did the lower courts erroneously hold that the gross receipts that are derived from the sale of refreshments and that pay for entertainment at a restaurant are not subject to the State’s admissions and amusement tax because the refreshments are not sold ‘in connection with entertainment’ ⁴⁷⁶ within the meaning of § 4-101(b)(1)(v) of the Tax General Article?” We answer the question in the negative and hold that § 4-101(b)(1)(v) requires a direct financial nexus between the sale of refreshments „ and entertainment provided by the establishment. Under the specific facts of the case sub judice, where the restaurant providing the music charged no cover or admissions charge, required no minimum purchase by its patrons during periods of live music and did not inflate its refreshments’ prices during the playing of the live music, the Tax Court’s determination that the refreshment sales were not “in connection with” the entertainment is correct. Accordingly, we affirm the judgment of the Court of Special Appeals.

I. Facts Clyde’s Restaurant Group 3 (Clyde’s) operates the two Maryland restaurants involved in the dispute in the case sub judice. One restaurant is located in Chevy Chase while the other is located in Columbia. A. Clyde’s of Chevy Chase, Inc. The Chevy Chase location, which opened in 1995, is a two-floor restaurant comprising of around 16,000 square feet. The main dining area is located at street level just inside the primary entrance.

This area is a nonsmoking area that accommodates 298 customers. The bar area, known as the Race Bar due to its classic auto racing theme, 4 is located one floor below street level. The Race Bar, where smoking was permitted, contains a hardwood floor section with an oval bar in the center of the room with approximately 80 to 90 bar stools surrounding it. Encircling the bar is a carpeted section with 120 booths for dining.

At the end of the room is a raised stage/display area which is approximately six feet deep. Mu ⁴⁷⁷ sicians hired by Clyde’s perform in this stage area on certain nights. To enhance the restaurant’s ambiance, increase revenue, expand patronage, and maintain a varied atmosphere in the Race Bar area, the Chevy Chase location provides music. Three nights per week the music is live in the Race Bar.

The restaurant provides background music played through a cable music system at lunch and on the remaining nights of the week. The type of music played is dependent on the night of the week and occasion. The cable system generally plays easy-listening and background music. 5 On Friday nights, a traditionally busy night for restaurants, the restaurant hires a disc jockey to play CDs in the Race Bar. 6 The manager specifies the general type of music to be played, but the disc jockey decides the specific songs to be played. Testimony revealed that the music played on Friday nights tended to be played at a much higher volume than that of the cable music system.

On Saturday nights, a “three to five piece group” plays an upbeat style of music. 7 The final night of live music consists of either a Wednesday night easy-listening duo or a Thursday night jazz duo or trio. All musicians play on the stage area. The restaurant announces the musical performances on the back of the restaurant’s menu and on the restaurant’s web site. “[Fjree unsolicited listings in local newspapers,” including, but not limited to, the Washington Post, the Burtonsville Gazette and the Germantown Gazette are also made (alteration added). 8 These publications list the names of the per ⁴⁷⁸ formers and the date and time of the performances. The restaurant does not encourage dancing.

There is no dance floor in the Chevy Chase location, although, occasionally, patrons will spontaneously dance in the restaurant. The restaurant does not impose any admission fee or cover charge when it provides live entertainment. It similarly does not increase the prices of any food or drinks, nor does it require any minimum purchase in order for a patron to be present for the live entertainment. A person could be present for the entertainment without purchasing any product or service from the restaurant.

Musicians, or the disc jockey (DJ), are paid out of the till at the end of the night regardless of the amount of sales from food or beverages. The prices at the Clyde’s restaurant in Chevy Chase are competitive with the prices of similar local establishments. Competition with other local restaurants and overhead costs, including the cost of food, drinks, utilities, payroll, supplies, menus and music, drive the restaurant’s price setting. The restaurant considers all of these factors, compares them with what the market can bear, and accordingly determines the prices for its food and beverages.

B. Clyde’s of Columbia, Inc. The Columbia restaurant is a one-floor establishment located in the Columbia Town Center. The restaurant can accommodate about 320 for dinner and the bar has approximately 40 bar stools. This restaurant has a cable music system similar to that of the Chevy Chase location for the purpose of providing background music to enhance the atmosphere and dining experience. Thursday night is the only night the Columbia location provides other music.

This usually consists of one or two acoustical guitarists playing contemporary music from 9:30 p.m. until 12:30 a.m. Customers generally may request songs to be played. No location for dancing is provided and dancing is not encouraged. Similar to the Chevy Chase location, the Columbia restaurant does not charge an admissions or cover charge, raise its ⁴⁷⁹ prices or require any minimum purchase on Thursday evenings when the musicians play.

Its prices are competitive in relation to the other local restaurants. The performers are paid in a similar manner to the entertainers in the Chevy Chase location. If there is not enough cash in the cash drawer to pay the performers, funds are taken from stored cash in the main office. There are no local publications that regularly announce the Columbia restaurant’s entertainment.

The restaurant only announces its live music on the restaurant’s menu board. The general manager of the Columbia restaurant testified that the percentage and rate of sales for food and beverages at the Columbia location do not differ between the nights when live music is offered and the nights when it is not offered. 9 C. The Comptroller’s Audit and Assessment The Comptroller’s audit revealed that the proprietor of the Chevy Chase location had not regularly collected or remitted the admissions and amusement tax 10 on sales of refreshments (food and beverage) made in the Race Bar of the restaurant during the periods when the restaurant provided live entertainment. During the audit, the Comptroller reviewed the sales records for a sample week chosen by the restaurant and then somehow made a determination of the percentage ratio of the sales made in the Race Bar when live music or the services of a DJ were provided, to the total refreshment sales ⁴⁸⁰ for that week. To arrive at the total amount of admissions and amusement tax it alleged was due for the assessment period, this percentage was then multiplied by the Chevy Chase location’s total annual gross sales for the assessment period.

From this an assessment was made and a total tax due amount determined. The amount in admissions and amusement tax already paid by the Chevy Chase proprietor was then subtracted from the total tax alleged to be due to arrive at the claimed deficiency. On October 27, 1999, the Comptroller alleged a total tax due from Clyde’s of Chevy Chase, Inc. in the amount of $48,524.34. The Comptroller’s audit of the Columbia location revealed that the proprietor of that restaurant had, on a regular basis, remitted the admissions and amusement tax 11 on refreshment sales made during the time that live entertainment was provided.

The auditor, however, determined that the proprietors had underpaid the tax, and thus issued a tax assessment. The Comptroller used the same process in determining the assessment against the Columbia location as he did for the Chevy Chase location. On October 28, 1999, the Comptroller alleged a total tax due from Clyde’s of Columbia, Inc. in the amount of $4,886.35.

II

Discussion The determinative issue on review in this case is whether the Tax Court correctly interpreted the meaning of the phrase “in connection with entertainment” contained within Md.Code (1988, 1997 Repl.Vol., 2003 Supp.) § 4-101(b)(1)(v) of the Tax-General Article. We hold that the Tax Court correctly interpreted § 4-101(b)(1)(v), and that there is substantial evidence in the record to support the Tax Court’s findings of fact that respondents’ gross receipts derived from the sale of refreshments during live entertainment were not “in connection with entertainment.” ⁴⁸¹ A. Standard of Review (1) In the case sub judice, we review the decision of the Tax Court, which is an administrative agency. See Supervisor of Assessments of Baltimore County v. Keeler, 362 Md. 198, 207 , 764 A.2d 821, 825-26 (2001); see also Read v. Supervisor of Assessments of Anne Arundel County, 354 Md. 383, 391 , 731 A.2d 868, 872 (1999); Prince George’s County v. Brown, 334 Md. 650 , 658 n. 1, 640 A.2d 1142 , 1146 n. 1 (1994); Shipp v. Bevard, 291 Md. 590 , 592 n. 1, 435 A.2d 1114 , 1115 n. 1 (1981); Shell Oil Co. v. Supervisor of Assessments of Prince George’s County, 276 Md. 36, 38 , 343 A.2d 521, 522 (1975). “The standard of review of a decision of the Tax Court is, of course, a very limited one.” 318 North Market Street, Inc. v. Comptroller of the Treasury, 78 Md.App. 589, 593 , 554 A.2d 453, 455 (1989). Maryland Code (1984, 1999 Repl.Vol.), § 10-222(h) of the State Government Article directs that, when reviewing an administrative agency’s decision, a court may: “(1) remand the case for further proceedings; (2) affirm the final decision; or (3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision: (i) is unconstitutional; (ii) exceeds the statutory authority or jurisdiction of the final decision maker; (iii) results from an unlawful procedure; (iv) is affected by any other error of law; (v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or (vi) is arbitrary or capricious.” The decisions of the Tax Court are subject to this standard of judicial review pursuant to Md.Code (1988, 1997 Repl.Vol.) § 13-532(a) of the Tax-General Article, which states, “A final order of the Tax Court is subject to judicial review as provided for contested cases in §§ 10-222 and 10-223 of the State Government Article.” ⁴⁸² In Keeler , this Court, in reference to judicial review of a final order of the Tax Court, stated: “ ‘[A] reviewing court is under no statutory constraints in reversing a Tax Court order which is premised solely upon an erroneous conclusion of law.

See, e.g., Supervisor of Assess, v. Carroll, 298 Md. 311 , 469 A.2d 858 (1984); Comptroller v. Mandel Re-Election Com., 280 Md. 575 , 374 A.2d 1130 (1977). On the other hand, where the Tax Court’s decision is based on a factual determination, and there is no error of law, the reviewing court may not reverse the Tax Court’s order if substantial evidence of record supports the agency’s decision.’ Ramsay, Scarlett & Co. v. Comptroller of the Treasury, 302 Md. 825, 834 , 490 A.2d 1296, 1301 (1985). “Accordingly, in this case, we are limited to determining the legality of the decision of the Tax Court and whether there was ‘substantial evidence’ in the record to support its findings and conclusions. Comptroller of the Treasury v. Disclosure, Inc., 340 Md. 675, 683 , 667 A.2d 910, 914 (1995); State Dep’t of Assessments and Taxation v. Consumer Programs, 331 Md. 68, 73 , 626 A.2d 360, 362 (1993); see also CBS, Inc. v. Comptroller of the Treasury, 319 Md. 687, 697-98 , 575 A.2d 324, 329 (1990); Supervisor of Assessments of Montgomery County v. Group Health Ass’n, Inc., 308 Md. 151, 156 , 517 A.2d 1076, 1078 (1986); St. Leonard Shores Joint Venture v. Supervisor, 307 Md. 441, 446 , 514 A.2d 1215, 1218 (1986); Ramsay, 302 Md. at 838-39 , 490 A.2d at 1302 . In short, a reviewing court is authorized to reverse a decision of the Tax Court, if the agency ‘erroneously determines or erroneously applies the law.’ State Department of Assessments and Taxation v. Consumer Programs, 331 Md. 68, 72 , 626 A.2d 360, 362 (citing Roach v. Comptroller, 327 Md. 438 , 610 A.2d 754 (1992)); see also Friends School v. Supervisor, 314 Md. 194, 199 , 550 A.2d 657, 659 (1988); Supervisor of Assessments v. Asbury Methodist Home, Inc., 313 Md. 614, 626-628 , 547 A.2d 190, 196 (1988); Supervisor v. Chase Assoc., 306 Md. 568, 574 , 510 A.2d 568, 571 (1986); ⁴⁸³ Ramsay, 302 Md. at 834 , 490 A.2d at 1301 ; Macke Co. v. Comptroller, 302 Md. 18, 22 , 485 A.2d 254, 257 (1984).” Keeler, 362 Md. at 207-08 , 764 A.2d at 826 (alteration added); see also Comptroller of the Treasury v. Gannett Co., Inc., 356 Md. 699, 707-08 , 741 A.2d 1130, 1134-35 (1999).

We do not specifically address the Tax Court’s findings of fact as neither petitioner nor respondent challenges the validity of those factual findings, and, in addition, the record is replete with evidence supporting such findings. Petitioner’s challenge is confined then to the Tax Court’s legal interpretation of the admissions and amusement tax statute. When this Court has interpreted statutes, we have annunciated that the “ ‘paramount goal ... is to identify and effectuate the legislative intent underlying the statute at issue.’ ” Moore v. Miley, 372 Md. 663, 677 , 814 A.2d 557, 566 (2003)(quoting Derry v. State, 358 Md. 325, 335 , 748 A.2d 478, 483 (2000)). The legislative intent can be ascertained through an analysis of the plain language of the statute and from consideration of its context within the statutory scheme as a whole.

Moore, 372 Md. at 677 , 814 A.2d at 566 ; see also In re Mark M., 365 Md. 687, 711 , 782 A.2d 332, 346 (2001). Where “ ‘the words of a statute, construed according to their common and everyday meaning, are clear and unambiguous and express a plain meaning,’ we ‘will give effect to the statute as it is written.’ ” Moore, 372 Md. at 677 , 814 A.2d at 566 (quoting Jones v. State, 336 Md. 255, 261 , 647 A.2d 1204, 1206-07 (1994)). In situations where the statutory language is ambiguous, however, this Court looks beyond the statute’s plain language in discerning the legislative intent. Moore, 372 Md. at 677 , 814 A.2d at 566 ; see also In re Mark M., 365 Md. at 711 , 782 A.2d at 346 .

Once the language is found to be ambiguous, it is then appropriate to look to the legislative history and other relevant factors that may reveal the intent or general purpose, such as “a bill’s title and function paragraphs, amendments ... and other material that fairly bears on the fundamental issue of legislative purpose or goal.” Moore, 372 Md. at 677 , 814 A.2d at 566 (quoting In re Anthony R., 362 Md. 51, 58 , 763 A.2d 136, 140 (2000)(internal ⁴⁸⁴ citation omitted)). A “[construction of a statute which is unreasonable, illogical, unjust, or inconsistent with common sense should be avoided.” Degren v. State, 352 Md. 400, 417, 722 A.2d 887, 895 (1999) (alteration added)(quoting Tracey v. Tracey, 328 Md. 380, 387 , 614 A.2d 590, 594 (1992)); see also Moore, 372 Md. at 677-78 , 814 A.2d at 566 . When specifically interpreting tax statutes, this Court recognizes that any ambiguity within the statutory language must be interpreted in favor of the taxpayer. In Gannett, we stated: ‘When ambiguities arise in construing tax statutes, Maryland courts must interpret tax code provisions that aid in determining taxable income in the taxpayer’s favor.

We noted in Comptroller v. John C. Louis Co., 285 Md. 527, 539 , 404 A.2d 1045, 1053 (1979), that ‘when ... the applicability of a tax statute and not a tax exemption is being construed, it is the established rule not to extend the tax statute’s provisions by implication, beyond the clear import of the language used, to cases not plainly within the statute’s language, and not to enlarge the statute’s operation so as to embrace matters not specifically pointed out. In case of doubt, tax statutes are construed “most strongly against the government, and in favor of the citizen.” Comptroller of the Treasury v. Mandel Re-Election Comm., 280 Md. 575, 580 , 374 A.2d 1130, 1132 (1977); Comptroller of the Treasury v. M.E. Rockhill, Inc., 205 Md. 226, 234, 107 A.2d 93, 98 (1954).’ See also Scoville Serv., Inc. v. Comptroller, 269 Md. 390, 396 , 306 A.2d 534, 538 (1973) (‘[WJhere there is doubt as to the scope of the statute, ... it should be construed most strongly in favor of the citizen and against the state.’) (citing F. & M. Schaefer Brewing Co. v. Comptroller, 255 Md. 211, 257 A.2d 416 (1969)); McConihe v. Comptroller, 246 Md. 271 , 228 A.2d 432 (1967); Fair Lanes, Inc. v. Comptroller, 239 Md. 157 , 210 A.2d 821 (1965); Comptroller v. M.E. Rockhill, Inc., 205 Md. 226 , 107 A.2d 93 (1954).” ⁴⁸⁵ Gannett, 356 Md. at 707-08 , 741 A.2d at 1135 (emphasis added). See also Xerox Corp. v. Comptroller of the Treasury, 290 Md. 126, 136-37 , 428 A.2d 1208, 1214 (1981). In this case, we hold that the text of § 4-101(b)(1)(v), and more specifically the phrase “in connection with entertainment,” is ambiguous.

B. Admissions and Amusement Tax The statute at issue in the case sub judice is located within Title 4 of the Tax-General Article of the Maryland Code, entitled “Admissions and Amusement Tax.” Section 4-102 of the statute provides that a Maryland county “may impose, by resolution, a tax on ... the gross receipts derived from any admissions and amusement charge in that county.” Md.Code (1988, 1997 Repl.Vol.) § 4-102(a) of the Tax-General Article (emphasis added). 12 Petitioner contends that the Tax Court misinterpreted the definition of what constitutes an admissions and amusement charge, specifically, its interpretation of the nexus required between entertainment and sales of refreshments 13 contained within § 4-101(b)(1)(v). The relevant text of § 4-101(b)(1) states: “(b) Admissions and amusement charge. — (1) ‘Admissions and amusement charge’, unless expressly provided otherwise, means a charge for: (i) admission to a place, including any additional separate charge for admission within an enclosure; (v) merchandise, refreshments, or a service sold or served in connection with entertainment at a nightclub or room ⁴⁸⁶ in a hotel, restaurant, hall, or other place where dancing privileges, music, or other entertainment is provided.” [Some emphasis added.] Md.Code (1988, 1997 Repl.Vol.2003 Supp.) § 4-101(b)(1) of the Tax-General Article. Petitioner argues that “[t]he plain language of the statute and the common sense, logical interpretation of that language authorize the assessment of the admissions and amusement tax on receipts Clydes collected from the sale of refreshments during periods when entertainment is provided” (alteration added). Specifically, petitioner asserts that the Tax Court’s decision misinterpreted the “in connection with entertainment” language that “clearly and unambiguously” allowed for the tax.

We disagree. The phrase “in connection with entertainment” is not clear and unambiguous. Connection is defined, generally, as “a relationship in which a person, thing, or idea is linked or associated with something else” or “the action of linking one thing with another.” The Oxford American College Dictionary 294 (Putnam 2003). Connection is also defined elsewhere as “[t]he state of being ... joined; union by junction, by an intervening substance or medium, by dependence or relation, or by order in a series.” Black’s Law Dictionary 302 (6th ed., West 1990)(alteration added).

Here, the refreshments, including food, sold at the two Clyde’s restaurants must be “in connection with” the five entertainment at the-restaurants. The statute provides no guidance as to the level of nexus necessary to satisfy the “connection” requirement. A broad interpretation would allow virtually any relation, no matter how minimal, between the refreshments and entertainment to be taxable. 14 One could literally interpret this to mean that all sums paid for any refreshments served at any time in the same room, regardless of whether prices reflect ⁴⁸⁷ the cost of entertainment, are assessable for tax purposes under this statute. A strict interpretation would allow only those connections with direct financial implications, such as raising the price of food during a performance or the imposition of an admission, cover or minimum charge, to be taxable.

The statute’s text provides no guidance in this regard. As the necessary level of dependence or relation between the refreshments and the entertainment is not set forth in the text of the statute, the statute is not clear, but inherently ambiguous. A brief review of the history of Maryland’s admissions and amusement tax and its federal predecessor is necessary to illustrate the extent of the direct financial nexus between refreshment sales and entertainment for profit that was intended by Maryland’s admissions and amusement tax. The admissions and amusements tax first appeared in Maryland when it was enacted in 1936; the tax was levied against gross receipts from: “any admission or cover charge for seats and tables, reserved or otherwise, at any restaurant, hotel, café, night club, cabaret, roof garden or similar place furnishing a floor show or similar entertainment.

In cases where there is no charge for admission or cover charge to such place of entertainment, furnishing a floor show or similar entertainment, but a charge for admission is wholly or in part included in the price paid for refreshments, service or merchandise, an equivalent tax shall be levied and collected upon twenty per cent of the gross receipts from refreshments, service and merchandise.” 1936 Md. Laws, Chap. 10, § 3. This earlier version of the statute might have better supported the position taken by petitioner. In 1949, however, the Maryland admissions and amusement tax statute was amended 15 into a form that is similar to the current statute. The 1949 statute stated: ⁴⁸⁸ “ADMISSIONS AND AMUSEMENT TAX “338.

There shall be levied, collected and paid a tax ... of the gross receipts of every person, firm or corporation derived from the amounts charged for (1) admission to any place, whether such admission be by single ticket, season ticket or subscription, (2) admission within an enclosure in addition to the initial charge for admission to such enclosure, (3) the use of sporting or recreation facilities or equipment, and (4) admission, cover charge for seats or tables, refreshment, service or merchandise at any roof garden, cabaret or other similar place where there is furnished a public performance when payment of such amounts entitles the patron thereof to be present during any portion of such performance. The term ‘roof garden or other similar place’ shall include any room in any hotel, restaurant, hall or other public place where music or dancing privileges or other entertainment, except mechanical music, radio or television, alone, and where no dancing is permitted, are afforded the patrons in connection with the serving or selling of food, refreshment or merchandise. “339. (a) Any county shall be authorized by resolution to levy a tax on the gross receipts of every person, firm or corporation obtained from sources within said county but not within any incorporated city or town thereof, derived from the amounts charged for admission or refreshment, service and merchandise to the same extent and in the same manner as that levied by the State under the provisions of the preceding section; and any incorporated city or town shall be authorized, by ordinance or resolution, to levy a tax on the gross receipts of every person, firm or corporation obtained from sources within said city or town derived from the amounts charged for admission or refreshment, service and merchandise to the same extent and in the same manner as that levied by the State under the provisions of the preceding section; provided, however, that the rate of ⁴⁸⁹ tax which may be levied by any county or incorporated city or town need not be the same as that imposed by the State. “(b) The tax authorized to be levied by the provisions of this section shall be collected by the Comptroller and paid in the same manner as the tax levied by the State.” 16 1949 Md. Laws, Chap. 255 (emphasis added). By 1957 this statute had been recodified, without substantive change, as Md.Code (1957), Art. 81 § 402.

In 1971, the Legislature repealed and reenacted Article 81 § 402 “to change the kinds of places and events to which the State tax on admissions and amusements is charged on amounts for entrance to such places or events.” 1971 Md. Laws, Chap. 429. 17 In 1988, the ⁴⁹⁰ General Assembly again rewrote and recodified this statute when it added the Tax-General Article to the Maryland Annotated Code. The “Admissions and Amusement Tax” was placed in Title 4 of the Tax-General Article and the language specific to the issue in the case sub judice, the language derived from Article 81 § 402, was recodified into § 4-101(b) of the Tax-General Article. That version of the statute read: “4-101. Definitions....

(b) ‘Admissions and amusement charge, unless expressly provided otherwise, means a charge for: (1) admission to a place, including any additional separate charge for admission within an enclosure; (2) use of a game of entertainment; (3) use of a recreational or sports facility; (4) use or rental of recreational or sports equipment; and (5) merchandise, refreshments, or a service sold or served in connection with entertainment at a nightclub or room in a hotel, restaurant, hall, or other place where dancing privileges, music, or other entertainment is provided.” 1988 Md. Laws, Chap. 2. The Revisor’s Note as to these amendments states, in part, the following: “[I]n item (1) of this subsection, the former references to ‘cover charges’ and ‘a cover charge for seats or tables at any roof garden, cabaret or other similar place’ are deleted as unnecessary in light of the inclusion of any ‘charge’ for admission to any ‘place’. ... in item (1) of this subsection, the former condition if ‘payment of the amount[s] entitles the patron [thereof] to be present during any portion of the performance’ and the former limitations “where there is furnished a performance’ ⁴⁹¹ are deleted as unnecessary in light of the right to attend all or part of a performance implicit in the reference to a ‘charge for ... admission’. ... in item (5) of this subsection, the former reference to entertainment as being ‘afforded the members, guests, or patrons’ is deleted as surplusage.” Id. (alteration added). These notes appear to reflect an interpretation that this assessment is directed at taxing charges allowing patrons access to the entertainment, ie., a direct financial connection between the charges and entertainment.

The right to access implicit in an admission charge is the driving force behind the statute. As we have noted and as the Court of Special Appeals stated, the admissions and amusement tax “although authorized by the General Assembly, is imposed by local authority.” The Comptroller administers this tax on behalf of the local taxing authority, retaining a portion only to cover the cost of its administration of the tax. See Md.Code (1988, 1997 Repl. Vol.) § 2-102(1) of the Tax-General Article (stating, “In addition to the duties set forth elsewhere in this article and in other articles of the Code, the Comptroller shall administer the laws that relate to: (1) the admissions and amusement tax; ...”).

Substantive changes, not relevant to the issue before us, were added in 1994, which created a subsection “(c),” thus adding a “Game of Entertainment,” under the definition of this tax. The current version of the admissions and amusement tax, last amended in 1999, 18 ie., the statute at issue in this case, states: ⁴⁹² The total music expenditures for 1999 for the Chevy Chase restaurant, including recorded music, totaled $66,871, while the gross sales for food and beverages totaled $7,091,728. The 1998 totals were $68,820 for all music and $7,249,873 for sales of food and beverages. “ § 4-101. Definitions.

(a) In general. — In this title the following words have the meanings indicated. (b) Admissions and amusement charge. — (1) ‘Admissions and amusement charge’, unless expressly provided otherwise, means a charge for: (i) admission to a place, including any additional separate charge for admission within an enclosure; (ii) use of a game of entertainment; (iii) use of a recreational or sports facility; (iv) use or rental of recreational or sports equipment; and (v) merchandise, 19 refreshments, or a service sold or served in connection with entertainment at a nightclub or room in a hotel, restaurant, hall, or other place where dancing privileges, music, or other entertainment is provided. (2) ‘Admissions and amusement charge’ does not include a charge for admission to a political fundraising event. (e) Game of entertainment. — ‘Game of entertainment’ includes, in Anne Arundel County or Calvert County, the game of instant bingo permitted under a commercial bingo license.

(d) Person. — ‘Person’ includes: ⁴⁹³ (1) this State or a political subdivision, unit, or instrumentality of this State; (2) another state or a political subdivision, unit, or instrumentality of that state; and (3) a unit or instrumentality of a political subdivision of this State or of another state. (e) Stadium Authority. — ‘Stadium Authority’ means the Maryland Stadium Authority, created under § 13-702 of the Financial Institutions Article.” Md.Code (1998, 1997 Repl.Vol., 2003 Supp.), § 4-101 of the Tax-General Article. 20 The tax is not aimed at overhead costs assumed by the establishment, but at the direct charging of the entertainment costs back to the patrons then availing themselves of that entertainment. This interpretation finds ⁴⁹⁴ support in the model for Maryland’s admissions and amusements tax, the federal cabaret tax. In Villa Nova Night Club, Inc. v. Comptroller of the Treasury, 256 Md. 381, 386 , 260 A.2d 307, 309 (1970), we said, “It is quite apparent that § 402 [a similar version to that interpreted in the Burn Brae case] is structured in a fashion strikingly similar to § 1700(e)(1) of the Internal Revenue Code of 1939, as amended, 26 U.S.C. § 1700 (e)(1), which imposed the federal cabaret tax, since repealed....” The federal cabaret tax was substantively amended after the creation of the Maryland admissions and amusement tax in 1936 and those amendments, for the most part, were reflected in the 1949 amendments to the Maryland statute.

See Villa Nova, 256 Md. 381 , 260 A.2d 307 . Accordingly, this Court, in reference to the federal cabaret tax, has said that “[decisions concerning this federal statute are instructive” as to its Maryland antecedent. Comptroller of the Treasury v. The Mandel, Lee, Goldstein, Burch Re-Election Com., 280 Md. 575, 580 , 374 A.2d 1130, 1133 (1977)(alteration added)(holding that the admissions and' amusement tax did not apply to a fund-raising committee’s event because the live organ music being provided, which was being played from behind a curtain, did not fit within the statutory definition of a performance as the patrons of the event did not attend the event to hear the music; the ambiguity in the statute was resolved in the taxpayer’s favor). A brief history of the federal statute is in order. 21 Section 1700 of the Internal Revenue Code, 26 U.S.C. § 1700 , the federal cabaret tax, was first enacted as an admissions tax by Congress in 1917 and repealed in 1965.

As stated in Geer v. Birmingham, 88 F.Supp. 189, 197 (N.D.Iowa 1950), rev’d, 185 F.2d 82 (8th Cir.l950)(emphasis added)(alteration added), 22 the original tax was subdivided into two parts: ⁴⁹⁵ “Thus, from its inception, the admissions tax was imposed upon the general field of entertainment, which was further subdivided for purposes of the imposition of the tax into two different categories because of the nature of the entertainment subject to the tax. On the one hand was that form of entertainment to which a direct admission charge was made upon the patrons ... and on the other hand that form of entertainment to which no admission charge as such was made but rather the charge for admission was included in whole or in part in the price paid by the patron for ⁴⁹⁶ refreshment, service or merchandise. ‘What are commonly know as cabarets’ comprised this secondary category.” In Section 622 of the Revenue Act of 1942, Congress made substantive changes to the federal cabaret statute; the Geer court quoted from the amended Section 1700(e)(1) when it stated: “ ‘A tax ... of all amounts paid for admission, refreshment, service, or merchandise, at any roof garden, cabaret, or other similar place furnishing a public performance for profit, by or for any patron or guest who is entitled to be present during any portion of such performance. The term ‘roof garden, cabaret, or other similar place’ shall include any room in any hotel, restaurant, hall, or other public place where music and dancing privileges or any other entertainment, except instrumental 23 or mechanical music alone, are afforded the patrons in connection with the serving or selling of food, refreshment or merchandise. A performance shall be regarded as being furnished for profit for purposes of this section even though the charge made for admission, refreshment, service, or merchandise is not increased by reason of the furnishing of such performance.’ ” Geer, 88 F.Supp. at 211 (emphasis added).

The amendments, including the addition of the emphasized language, were “intended to support the position the Treasury Department had taken in its Regulations, that hotel dining rooms similar to those in the cases of ... Broadmoor Hotel ... and Deshler Hotel ... should come within the category of a ‘roof garden, cabaret or other similar place furnishing a public performance for profit.’ ” Geer, 88 F.Supp. at 211 . In Deshler Hotel Co. v. Busey, 36 F.Supp. 392 (S.D.Ohio 1941), the court found that the federal cabaret tax was improperly assessed even where a hotel offered live dance music ⁴⁹⁷ played by an orchestra with instrumental and vocal soloists during dinner hours in one of its three dining rooms, the Ionian Room, and advertised the playing of such music and singing. While the orchestra was playing, the hotel did not institute a cover charge, a minimum charge for purchases or any other special charge on patrons entering the room where the music was being played.

Patrons only paid for the food or refreshments being served. Patrons of any of the three dining rooms were allowed to enter the Ionian Room during the performance. The prices were higher in the other two dining rooms because they were more exclusive than the Ionian Room, although the latter room was the location of the entertainment. In holding that there was no charge for admission, the court said: “[I]t is clear that the law, as a prerequisite to imposition of the tax, requires that there must be a charge for admission, which may be wholly or in part included in the price paid for refreshment, service, or merchandise.

This is the first essential requirement of the act. It has not been changed by regulation and it cannot be so changed by regulation as to eliminate the requirement of an admission charge. In this respect the law is definite and no room is left for administrative interpretation; there must be a charge for admission. “The stipulated facts in the instant case show that the plaintiff made no cover charges, minimum charges, door charges, or special charges; therefore, there could have been no direct charge for admission. Persons might enter the Ionian Room, remain there for a time, and leave again without paying, or becoming liable for the payment of any sum whatever.

There remains only the possibility that some sort of an admission charge might be included in the price of food, service, or merchandise purchased. This is refuted by the facts of the case.” Id. at 395-96 . (alteration added). The court went on to hold that the performance in Deshler Hotel was not a performance for “profit” when it said: ⁴⁹⁸ “Since it has been found that no admission charge in any form was made, it follows as a matter of logic, that the performances could not have been given for a direct profit.

Rather it would appear that the entertainment was furnished at the expense of the hotel as an ordinary accompaniment of the service of food and refreshment in the manner customary to hotels of the class to which the plaintiff belongs; something expected by the customer and essential to good and profitable business relations, but in itself yielding no profit. In this case, the expense of the entertainment was an overhead expense incidental to the class of business in which the plaintiff was engaged. This court is therefore of the opinion and holds as a finding of fact, that such performances were not for profit in any accepted sense of the word, but that the expense involved was borne by the plaintiff as overhead. In general, it may be said that no commercial firm undertakes expenditures in the form of overhead without expecting a profit from the business in which the expenditures are made, but it is not from these overhead items that profit is derived.

The profit is derived from the business itself and it is partially consumed by the overhead expense; hence, such items are, in themselves, items of expense and not of profit.” Id. at 396 (emphasis added). The court’s analysis interprets the need for both an admission charge and a direct financial nexus between the entertainment and profit. Without any charge for admission or a “direct profit” or nexus, the entertainment should be seen as an overhead cost, an expense much like the cost of employees, supplies and the like. The facts of the current case are strikingly similar to that of Deshler Hotel.

There is no cover charge, minimum charge or the like for patrons to enter either of the Clyde’s restaurants and avail themselves of the entertainment. The only possible charge would be the price generally paid for refreshments, which themselves are not required to be purchased. In essence, there is no direct charge for admission to the entertainment. Similarly, eleven years prior to Deshler the District Court in United States v. Broadmoor Hotel Co., 30 F.2d 440 (D.Colo. ⁴⁹⁹ 1929), held that the tax did not apply to a hotel that provided free orchestra music to the public in its ballroom.

Afternoon tea was served in public rooms at the price of seventy-five cents; the price was the same in all of the hotel’s rooms, regardless of whether entertainment was provided. The rooms were available free from any cover or admission charge to all guests of the hotel and to the general public as well. The general public was not required to purchase anything; the dancing and entertainment were free of direct charge. The court stated: “Music has been a common accessory of hotel dining rooms and lobbies, both before and after the enactment of this statute; so, if Congress had intended to cover the situation we are considering, they would have definitely said so.

Therefore, how can it be said that the defendant, in addition to running a hotel, is conducting a roof garden, cabaret, or other similar entertainment. “It is contemplated that the entertainment referred to shall be conducted for profit and admission charged. But it may be assumed from the statement of facts that 75 cents is not an excessive charge for tea; so, where is any admission charge, and where is any direct profit, found? “This section of the Revenue Act calls for something that might be termed entertainment, as distinguished from the mere service of food in the manner and with the accessories customary and expected by the patrons of a hotel of the character of the Broadmoor. Otherwise, it would logically follow that every restaurant, that maintains a radio, victrola, or other musical instrument, would come within the provisions of this section. Such was not the intent of Congress.” Id. at 441 .

Although the courts in these cases were answering questions slightly different than in the case sub judice, the logic expressed by those courts is instructive on the question before us. The federal cases required a direct connection between the taxed sales and the entertainment provided. The courts held that the federal tax did not apply where an establishment did not require a cover or admission charge and did not require patrons to purchase refreshments, even where ⁵⁰⁰ the general purchase of refreshments could have been the only possible source of the revenue necessary to pay for the music. As previously mentioned, in response to the above and other similar decisions, Congress, in 1942, amended the federal cabaret tax to include the definition of a “roof garden, cabaret or other similar place.” Congress included the following phrase within the amendments, “A performance shall be regarded as being furnished for profit for purposes of this section even though the charge made for admission, refreshment, service, or merchandise is not increased by reason of the furnishing of such performance.” 26 U.S.C. § 1700 (e)(1)(1942) (repealed).

This all-encompassing provision demonstrates a Congressional intent to tax gross receipts in situations where there may be little or no direct financial nexus between the entertainment and refreshments; it taxes the receipts from any and all such sales when a defined entertainment is provided. In Jones v. Fox, 162 F.Supp. 449, 460 (D.Md.l957)(footnote omitted), that court stated: “In 1942, after several court decisions refusing to apply the tax to establishments which neither charged an admission fee nor increased the prices for food and drink so as to include a hidden charge for admission, Congress amended the statute by providing in substance that a public performance is deemed to be for profit despite the fact that any charges made are not increased by reason of the furnishing of such performance.” 24 The Jones court’s interpretation of the