Seattle Rule5-901

Admission tax exemption for Music Venues.

THE CITY OF SEATTLE DIRECTOR'S RULE IMPLEMENTING SEATTLE BUSINESS TAXORDINANCE RULE 5-901

Seattle Rule 5-901 Admission tax exemption for Music Venues.

Introduction. SMC 5.40.028 provides for an exemption from the admission taxfor qualifying music venues. This rule sets forth: (1) definitions (2) criteriato qualify for the music venue exemption; (3) cancellation of exemptioncertificate (4) appeal rights (5) record keeping requirements; and (6)examples.

Once a music venue secures a certificate of exemption, admission tax asimposed in SMC Section 5.40.020 shall not be charged to any person paying foradmission to any such exempt premises or location. If a promoter or otherperson hosts or presents live music at a qualified tax exempt music venue, thenall admission charges are exempt from the admission tax under SMC 5.40.020.Venues and others hosting or promoting at an exempt music venue will still besubject to the other Seattle business taxes in accordance with Title 5 of theSeattle Municipal Code.

(1) Definitions. For purposes of this rule and SMC Chapter 5.40.028, thefollowing definitions will apply:

(a) "Live Music" means an active performance of music by anindividual or individuals who, at the time of and during the performance,creates music or engages in an audible form of artistic expression, other than,or in addition to, any pre-recorded music, for an audience through the use ormanipulation of voice, instruments, or electronic or computerized equipment.

(b) "Music Venue" means any place, premise or location where livemusic is hosted or presented to the public, including but not limited to allhallways, bathrooms and other adjoining areas or the areas accessible to thepublic during the premises" or location  hours of operation. An outdoor location doesnot qualify as a music venue for purposes of this definition.

(c) "Violation" means a legally binding final decision, order,citation, or other finding of violation entered by any court, adjudicative bodyor government agency against any legal owner, operator, manager, or employee ofthe premises or location, or any other person hosting or presenting live musicat the premises or location.

(d) "Promoter" means any individual, sole proprietorship,partnership, corporation, association, or other public or private organizationof any character other than the owner or operator of the music venue thatpromotes, hosts, presents, operates, or sponsors any event, special offer,performance, or other activity or occurrence for which admission is charged ata music venue.

(e) "Complete application." For purposes of the applicationeffective date, a complete application means the submission of a fully executedMusic Venue Exemption Application, along with a copy of a certificate ofoccupancy.

(f) "Certificate of Occupancy." For buildings constructed after1957, the requirement for a Certificate of Occupancy exists for all admissionstax exemption applications. For buildings constructed before 1957, a letterfrom the Department of Planning and Development specifying the occupancy loadfor the establishment is required.

(2) Criteria to qualify for the music venue exemption

(a)(i)Certificate of occupancy of less than 1,000. In the event the musicvenue does not have a certificate of occupancy due to the age of the facility,then the Director will review all information available which will allow adetermination as to whether the occupancy is less than 1,000.

(ii) Submission of a complete application for music venue exemption. Theeffective date of the exemption will be the date the completed application isreceived by the Business License Tax Administration Division.

(iii) Operating criteria. In order to continue to qualify for the musicvenue exemption, the music venue must host or present live music on at leastthree (3) separate days per week at the premises or location on a regularschedule, and must hire one (1) or more musicians to perform the equivalent ofsixteen (16) individual performances per week at the premises or location. Theoperating test must be met on a calendar year quarterly basis. The test iscumulative for an entire quarter. In the event the effective date of theexemption is other than the beginning of a calendar year quarter, then thecalculation will be completed for that portion of the calendar year quarter.Subsequent quarter calculations will utilize the entire quarter. Live musicperformances hosted or presented by promoters or other persons at the exemptmusic venue will count towards the operating criteria test.

(iv) The filing of a quarterly report form with the Director that willvalidate the music venue's ability to meet the performance tests noted insection (iii) above.

(b)(i) Certificate of occupancy of 500 or less. In the event the musicvenue does not have a certificate of occupancy due to the age of the facility,then the Director will review all information available which will allow adetermination as to whether the occupancy is 500 or less.

(ii) Submission of a complete application for music venue exemption. Theeffective date of the exemption will be the date the completed application isreceived by the Business License Tax Administration Division.

(iii) Operating Criteria. A music venue with an occupancy of 500 or lessmust host or present live music on at least two (2) separate days per week atthe premises or location on a regular schedule.

(iv) The filing of an annual report form with the Director that willvalidate the music venue's ability to meet the performance test noted insection (iii) above.

(c) A venue under either section (2)(a) or (2)(b) above must not have morethan 3 violations of law within a 12 month period relating to public health,public safety, noise, licensing, taxing or permitting related to the ownership,possession, occupation, operation, use or maintenance of the location. If alocation receives more than three violations within a twelve month period, theadmissions tax exemption will be revoked and the location will be ineligible fora certificate of exemption for a period of one year from the date of the lastviolation.

(d) A venue under either section (2)(a) or (2)(b) above that has securedits certificate of exemption must remain current with all Seattle business licensetax certificate and tax reporting obligations. If an exempt music venue doesnot remain current with license tax certificate and tax responsibilities, thecertificate of exemption may be revoked.

(3) Conditions in which the Director shall cancel the music venue taxexemption certificate

The Director shall cancel the certificate of exemption of a location orpremises upon a determination by the Director that any of the following hasoccurred:

(a) A person secured the certificate of exemption by making a false representationin the application for the certificate; or

(b) The premises or location has more than 3 violations of law in any 12month period. The certificate of exemption will be cancelled for a period ofone year from the date of the fourth violation. The Director will review thepreceding 12 months upon each occurrence of a violation to determine if thepremise has received more than 3 violations in a 12 month period. If a promoteror other person presents or hosts at an exempt music venue and incurs violationsof law at the exempt music venue, these violations will count towards theviolation of law test for that music venue.

(c) The venue fails to maintain the proper records needed to file therequired quarterly report form used to substantiate the operational test.

(d) The venue fails, during any quarterly period, to meet the operatingcriteria.

                (i) For venues withcertificate of occupancy of less than 1,000 and greater than 501. In the eventa venue does not meet the 3 days per week and 16 individual performances perweek criteria for an entire quarter, it may still retain its exemption underthe 80% rule. If a venue can show that it has at least 31 live performances and166 individual performances for an entire quarter, it meets the 80% rule. If avenue falls below the 80% rule for two consecutive quarters, the Director willterminate the admissions tax exemption until the venue is able to demonstratethat they can meet the operating criteria for the music venue exemption.

                (ii) For venues withcertificate of occupancy of 500 or less. In the event a venue does not meet thelive music on two separate days per week minimum criteria, it may still retainits exemption under the 80% rule. A venue under this subsection (ii) that canshow that it had least 10 weeks with at least two separate days of live musicin a calendar quarter, it meets the 80% rule.  If a venue under this subsection (ii) fallsbelow the 80% rule for two consecutive quarters, the Director will terminatethe admissions tax exemption until the venue is able to demonstrate that theycan meet the operating criteria for the music venue exemption. A venue underthis subsection that fails to meet the 80% criteria for two consecutivequarters must notify the Director, file the necessary admission tax forms andpay the admissions tax due for the quarters in which the venue did not meet the80% criteria.

The music venue may reapply for the music venue exemption but must showthat they met the operating criteria during the 30 day period prior to there-application. The admissions tax will be due for each quarterly period inwhich the operating criteria are not met. The Department will work with thevenue owners to secure the necessary admission tax forms and payment of theadmission tax; or,

(e) The venue becomes delinquent with any Seattle business license taxcertificate or tax obligations. The Director will send out a notice ofdelinquency and will provide 45 days from the date of issuance of the notice ofdelinquency for the venue to cure the delinquency: or,

(f) The person who obtained the certificate of exemption no longer conductsor operates the premises or location that is the subject of the exemption. Newowners or operators are required to reapply for the certificate of exemption.

The director will issue a formal letter of revocation cancelling the musicvenue admission tax exemption certificate where applicable.

(4) Appeal rights

Any person whose certificate of exemption has been cancelled or any personwhose application for a certificate of exemption has been denied may contestthe finding by filing a written request for hearing with the Hearing Examinerwithin ten (10) days after the mailing of the notice of cancellation or noticeof denial of exemption. If the person who received the notice of cancellationor notice of denial files a written request for hearing within the prescribedperiod, the Hearing Examiner shall schedule and conduct a hearing in accordancewith the applicable Hearing Examiner rules.

(5) Record keeping for Exempt Music Venues.

A form shall be filed with the Director on a quarterly basis by each personto whom a certificate of exemption has been issued, and shall provideinformation sufficient to verify that during the corresponding quarter, thepremises or location was in compliance with the requirements of the operationalcriteria in Subsections B(2) and (3) of this SMC 5.40.028. The quarterlyreports shall be filed on a regular calendar quarter and shall be due 30 daysfrom the end of the calendar quarter. The quarterly reports are required to befiled by all music venues with occupancy of less than 1,000 and greater than500 that have secured a certificate of exemption from the Seattle admissiontax. Failure to file the quarterly report may result in a revocation of thecertificate of exemption. The annual report is required for music venues withoccupancy of 500 or less that have secured a certificate of exemption from theSeattle admission tax. Failure to file the annual report may result in arevocation of the certificate of exemption.

Backup documentation to support the operating data submitted with thequarterly report shall be attached.

All backup data shall be maintained pursuant to SMC 5.55.060. Allbusinesses are required to keep books and records necessary to substantiate thetax liability, deductions and exemptions of the business for a period of five(5) years after filing a tax return.

Each exempt music venue is still responsible for the record keepingrequirements in accordance with Seattle rule 5-900. The admission chargesreceived at an exempt music venue are exempt from the Seattle admission tax,but are still subject to the Seattle Business and Occupation tax. Therefore,adequate records are still required to track admissions data for the SeattleBusiness and Occupation tax reporting requirements. In the event a taxpayercannot meet the criteria for music venue tax exemption, they will beresponsible for remitting the Seattle Admission Tax. Therefore, it isimperative to maintain records to substantiate admission revenue in accordancewith Seattle rule 5-900. In the event that records have not been maintained,the City of Seattle will estimate the tax obligation due.

(6) Examples

A. Company A operates a live music venue. Company A submits its applicationfor the music venue admission tax exemption to the City of Seattle. Company Ahas provided its certificate of occupancy showing a capacity of 600, and afully executed music venue exemption application. A review of their accountindicates that they are current with all Seattle business license taxcertificate and tax obligations, and they have not obtained any violations oflaw. The effective date of the music venue exemption will be the date the fullyexecuted application was received by the City of Seattle.

B. Company A has been operating under their certificate of exemption forthe past 9 months. Company A has filed the quarterly report for the first twoquarters, and has demonstrated their ability to meet the operating criteriaunder SMC 5.40.028. When filing their quarterly report for the third quarter,Company A reveals that they did not meet the operating criteria or the 80% ruleduring the third quarter. Company A is responsible for reporting and paying theSeattle admission tax on all admission charges during the third quarter.Company A will have to meet the operating criteria during the fourth quarter,or they will lose their admission tax exemption certificate.

C. Company B operates a live music venue. Company B has had a validadmissions tax exemption for one year. During the second quarter afterreceiving their exemption certificate, Company B was cited for three violationsof law. During the first quarter of their second year, Company B is issued aviolation of law. Company B's exemption certificate will be cancelled the datethe fourth violation is issued. Company B will not be able to reapply for anadmission tax exemption certificate for one year from the date of the fourthviolation.

DIRECTOR'S CERTIFICATION

I, Glen M. Lee, Finance Director of the City ofSeattle, do hereby certify

under penalty of perjury of law, that the within andforegoing is a true and

correct copy as adopted by the City of Seattle,Department of Finance and

Administrative Services.

     DATED this ______ day of July 2016.

                              CITY OF SEATTLE,

                              a Washingtonmunicipality

                         By:     ____________________________________

                                Glen M. Lee,Finance Director

                                Department of Finance andAdministrative Services

Effectivedate: July 14, 2016