The opinion of the court was delivered by: Juergens, District Judge.
This action was instituted under the provisions of Section
1346(a)(1) of Title 28 United States Code, as amended, for
refund of federal "cabaret" taxes and interest thereon. These
taxes were imposed under the provisions of Section 1700(e) of the
Internal Revenue Code of 1939, 26 U.S.C.A. § 1700(e), and Section
4231 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 4231.
The plaintiff is a corporation organized and existing under and
by virtue of the laws of the State of Illinois and has its
principal place of business in East St. Louis, Illinois.
Prior to the institution of this action, plaintiff paid the
taxes in dispute and thereafter duly filed with the District
Director of Internal Revenue at Springfield, Illinois, its claim
for refund which was denied. All administrative procedure
preliminary to filing a suit in this Court has been complied with
and all such administrative relief was exhausted prior to the
filing of this action.
This cause was tried to the Court without a jury on August 4,
1958. Testimony was heard and thereafter the parties filed
For some time prior to December 1, 1951, plaintiff Bush's Steak
House, Inc. (hereinafter referred to as Bush) operated a dining
room, bars and private dining rooms at 100 W. Broadway, East St.
Louis, Illinois, first under the name of Bush's Steak House, Inc.
and after March 16, 1953, as Bush's, Inc. The operation continued
until 1957 when the establishment closed.
The operation was conducted in various rooms. One such room was
located in the basement of the building, which consisted of a bar
and was called the "Porthole". There was no entertainment of any
kind in this room. There was no cabaret tax assessed against the
operations conducted in this room and the operations therein are
not in issue.
On the main floor of the building were located the kitchen, the
main dining room, a private dining room and a bar, called the
"Cloverleaf Bar". Activities carried on in the kitchen, main
dining room and private dining room did not include taxable
entertainment and cabaret taxes were not assessed against these
operations. The Cloverleaf Bar was the scene of public
performances and entertainment furnished by the plaintiff for the
benefit of its guests and was admittedly subject to "cabaret"
tax. The main dining room and the Cloverleaf Bar were separate
and distinct rooms and the performances in the Cloverleaf Bar
could not be witnessed by the plaintiff's customers in the main
On the second floor of the building a barroom, known as the
Celebrity or Blue Room (hereinafter referred to as Celebrity
Room) was located. The Celebrity Room was open to the general
public only on Saturday night and if opened at other times was
used only for private parties. The Saturday night activities were
admittedly subject to cabaret tax and tax for these activities
was paid in full.
Of the numerous rooms in the building occupied by the
plaintiff, only two are concerned in this action; these are the
Cloverleaf Bar and the Celebrity Room.
In the Cloverleaf Bar plaintiff furnished some type of
entertainment each night with certain exceptions and these
exceptions are not in dispute. From the time the bar was opened
until midnight, when entertainment was furnished by the
plaintiff, it was limited to non-taxable instrumental music. This
entertainment started at varying times but always ended at
midnight. It consisted of a piano player and an accordionist. It
is not alleged that this type of entertainment subjected the
plaintiff to the payment of a cabaret tax. At midnight each night
and continuing until approximately 3:00 A.M. each morning, in
addition to the above instruments a singer was employed for the
entertainment of the plaintiff's customers.
No dancing or group singing, either organized, directed or
sponsored by the plaintiff was conducted in the Cloverleaf Bar,
nor was any master of ceremonies or an equivalent employed.
At or before 3:00 A.M. each day the singer went off duty and
the entertainment thereafter consisted solely of non-taxable
instrumental music, which latter type of entertainment continued
The only type of taxable entertainment presented by the
plaintiff for the benefit of its customers in the Cloverleaf Bar
was a vocalist between the hours of midnight and 3:00 A.M.
The Celebrity Room was open to the public, as stated above,
only on Saturday night — this for the purpose of permitting
dances on the premises. A singer was also sometimes engaged from
about midnight to approximately 3:00 A.M. The only type of
taxable entertainment presented by plaintiff in the Celebrity
Room was dancing from midnight to 3:00 ...