New law to affect entertainment venues

Dec. 17, 2013 @ 04:01 PM

A new admissions tax has presenters at local entertainment venues scratching their heads, and pondering the levy’s effect on communities that have long promoted a healthy arts climate.
Beginning in January, the cost of tickets for a concert, play, movie, ballgame and other types of entertainment will increase when an admissions tax that the state legislature enacted last summer takes effect. The new tax, enacted as part of a package of tax reforms, applies to venues as diverse as the Durham Performing Arts Center, the Durham Bulls Athletic Park, local music clubs and university artists’ series.
There are some exemptions (see sidebar), and some events have been “grandfathered” from the tax. For example, Durham Bulls fans will not have to pay the tax on 2014 games because they were first sold and advertised in 2013, said Scott Carter, spokesman for the Bulls. However, for events the ballpark adds in 2014, including any potential playoffs, the tax will apply, he said. The same rule applies to UNC’s Carolina Performing Arts series and the Duke Performances series. Ticket buyers for both series will see the effects in the 2014-2015 season, and any events added in 2014. (That exemption does not apply to non-live events like movies or exhibits.)
The admissions tax applies to for-profit and non-profit organizations that present ticketed events. The base tax is 4.75 percent plus any local sales tax. In Durham and Orange Counties, the tax will be 7.5 percent; for Chatham, 6.75 percent.
For some local clubs, the tax represents a higher tax burden. Like other clubs, The Pinhook currently pays a 3 percent entertainment tax. (The new law repeals that tax, and the 1 percent gross receipts tax movie theaters currently pay, in favor of the new sales tax.) The new ticket tax amounts to a 150 percent tax increase, which owner Kym Register called “just insane.” She added: “I’m not a franchise. I have one club. I’m not sure how we’re not going to pass that on to [the customer],” she said.
Non-profit presenters also are questioning the effect of the tax on ticket sales. They point out the paradox of levying the tax in a time when more arts offerings are becoming available locally, and at a time when state and local governments are emphasizing the connection between the arts and economic development. “From all I understand from colleagues around the country, it’s an unusual tax,” said Aaron Greenwald, executive director of Duke Performances. “At a time when we are really having an incredible flourishing of the arts in this region … you are adding an impediment,” he said. “In a general survey of my colleagues, there’s not another state that’s taxing tickets that not-for-profits are selling.” 
The tax is likely to be a burden on non-profit presenters, who previously did not have to collect a tax, said Shelly Green, president and CEO of the Durham Convention and Visitors Bureau. And while the tax may ultimately discourage some patrons from buying tickets, it will likely have little effect on the number of people coming to Durham. “At this point, I don’t think it’s going to impact us,” Green said. “People are still going to want to go to DPAC and the Carolina Theatre, and they’re going to want to go to events at the Arts Council.”
While the additional tax likely will not sway audience members determined to see their favorite performing artist, it may “affect folks on the fence” who are having to be more budget conscious, said Mark Z. Nelson, director of marketing and communications for Carolina Performing Arts. Nelson said he is concerned about the possible impact on sales of tickets to students. One of the missions of the UNC series is to expose students to performing artists in various fields. In the 2012-2013 season, the series sold 14,000 tickets, which are set at a lower price, to students, Nelson said. “It’s important that the students have access to this, regardless of what the public ticket price is. … Anything that limits the accessibility is not good,” he said.
“We feel it’s certainly going to have serious impact on a lot of venues,” said Stephen Barefoot, executive director of the N.C. Presenters Consortium. Many venues are trying to figure out the logistics of collecting the tax – whether to add it on to the ticket price, or absorb it, Barefoot said.
The 7.5 percent tax represents “a significant hit,” said Bob Nocek, president of the Carolina Theatre. His venue already has factored in the tax in offers to guest artists. The tax “really puts a burden on us in terms of our rental clients,” many of which are non-profit groups, Nocek said. “I don’t think the impact was thought through,” he said. The legislature “did not look at the impact in their own communities.”
The ArtsCenter in Carrboro is preparing to collect the tax, said Art Menius, executive director. He added: “But I think it’s a great setback for the cultural vibrancy of our entire state, and a real threat to those institutions that present arts through the nonprofit” sector, he said.