Comptroller of Treasury v. Family Entertainment Centers of Essex, Inc.

WEANT, Judge. The Comptroller of the Treasury, appellant, decided to levy assessments for unpaid admissions and amusement tax against the corporate appellees that own three restaurants, known to the public as “Chuck E. Cheese” restaurants. The appellant also decided to deny claims for refunds for certain admissions and amusement taxes to L.D.C.A. Inc. of Maryland, another corporate appellee who owns a restaurant known as “Gadgets.” Appellant based its decisions on its interpretation of § 402(a) 1 of Article 81 of the Md.Ann. Code. Appellant interprets the word “performance” in that section to include the preprogrammed, mechanical puppet shows that are automaticaly run every few minutes in appellees’ restaurants.

If appellant is correct, appellees would owe admission and amusement taxes. When the appellees appealed to the Maryland Tax Court, that agency disagreed with the Comptroller’s conclusions. The Comptroller consolidated appellees’ separate cases and appealed the Tax Court’s decision to the Circuit Court for Baltimore County. When the circuit court affirmed the Tax Court, the Comptroller appealed to this Court.

Appellant presents these questions on appeal: ⁸⁰ 1. Was admissions and amusement tax properly assessed (and refund properly denied), pursuant to § 402(a), on the gross receipts from amounts charged for refreshments where performances by mechanical characters are provided? 2. Was Family Entertainment Centers properly assessed admissions and amusement tax on its gross receipts from its video games and rides? We affirm. 1.

Can Pre-programmed Mechanical Puppets “Perform”? This case requires a decision on whether the life-sized, mechanical puppets displayed in restaurants like appellees’ are actually “performing” so that any receipts from the sale of refreshments or from admission fees are properly taxable under § 402(a). (All references will be to Article 81 unless otherwise noted.) Section 402(a) gives counties authority to tax entities on gross receipts that the entities collect from admission fees or food and beverage sales under certain circumstances. The circumstance that applies to this case is found in § 402(a)(4), which says that a county may levy tax on fees derived from amounts charged for refreshment, service or merchandise at any roof garden, cabaret or similar place where there is furnished a performance. * s)s s)s * * The term “roof garden or other similar place” shall include any room in any hotel, restaurant, hall or other 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 members, guests, or patrons in connection with the serving of selling of food, refreshment or merchandise. ⁸¹ Applying § 402(a), the Tax Court decided that the life-sized electronic puppets do not “perform” and that those machines are not unlike complex jukeboxes.

The circuit court affirmed pursuant to § 229(o) as well as the standards of review set out in Ramsay, Scarlett and Co. v. Comptroller, 302 Md. 825 , 490 A.2d 1296 (1985). The task is to decide whether the decision of the circuit court was clearly erroneous. Md. Rule 1086. This Court addressed the word “performance” as used in § 402(a) in Comptroller v. Citizens for Hoyer, 51 Md.App. 33 , 440 A.2d 429 (1982).

In that case this Court said that the Legislature has not defined the term. This Court further determined that a band of seven musicians (who played background music at a political-fundraising cocktail party, at which there was no dancing, and at which the presence of the band was unadvertized) was not “performing” pursuant to § 402(a).