State Bar of Wisconsin Return to Wisconsin Tax Appeals Commission





108 E. Wells Street

Milwaukee, WI 53202




P.O. Box 8907

Madison, WI 53708


DOCKET NO. 97-S-330



This matter was heard at Waukesha on September 14, 1999, and the parties filed post-hearing briefs. Attorneys Michael J. Conlan and Patricia A. Hintz, Quarles & Brady LLP, represent the petitioner. Attorney John Evans, Chief Counsel, represents the respondent. In addition to the parties' briefs, Attorney Robert A. Schnur, Michael Best & Friedrich LLP, filed a brief on behalf of several amici curiae: Milwaukee Symphony Orchestra, Inc.; Milwaukee Ballet Company, Inc.; Florentine Opera Company, Inc.; Skylight Opera Theatre Corp.; and United Performing Arts Fund, Inc.

Having considered the entire record, the Commission hereby finds, concludes, and orders as follows:


1. Petitioner, Milwaukee Repertory Theater, Inc. ("MRT"), is a nonstock corporation organized under Chapter 181 of the Wisconsin Statutes. MRT is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, as an organization "organized and operated exclusively for educational purposes."

2. MRT is located in downtown Milwaukee, Wisconsin, where it operates a theater complex consisting of the 730-seat Powerhouse Theater, the 200-seat Steimke Theater, and the 112-seat Stackner Cabaret. During the period under review, 1991 through 1994,(1) MRT produced and performed its shows on its own stages as well as producing A Christmas Carol annually for performance in the Pabst Theater. Over 500 MRT performances were presented each year.

3. MRT holds and is required to hold a Wisconsin seller's permit in conjunction with its sale of food and sundry items and its activities in the Pabst Theater and Stackner Cabaret.

4. On March 18, 1996, MRT filed amended Sales and Use Tax Returns with the Department, claiming refunds of the sales taxes paid on receipts from admissions to the Powerhouse, Steimke, and Pabst Theaters, and the Stackner Cabaret for the period under review. Under date of October 31, 1996 the Department denied MRT's refund claim.

5. MRT timely petitioned for redetermination, which the Department denied by Notice of Action dated August 8, 1997. MRT then timely appealed to this commission, challenging only the Department's denial of $304,225.52 in claimed refunds of taxes paid on admissions to the Powerhouse and Steimke Theaters. Admissions to the Stackner Cabaret and Pabst Theater are not at issue.

6. The mission of MRT is to create theatrical experiences which explore and illuminate the human condition.

7. MRT produces and presents public theatrical performances in the Powerhouse and Stiemke Theaters for primarily adult audiences. Generally, MRT intends to operate with a balanced budget, i.e., cash inflows equal cash outflows. MRT's primary sources of revenue are ticket sales, contributions, and grants. Ticket sales comprise approximately 55-60% of total income, and contributions and grants provide between 30-35% (perhaps as much as 40%) of total income.

8. Revenue from ticket sales for performances in the Powerhouse Theater never exceeds related expenses, either on a seasonal or individual play basis. Similarly, revenue from performances in the Stiemke Theater never exceeds related costs, either with respect to single plays or with respect to the season as a whole. MRT never intends that such performances be profitable. Approximately 50-60% of expenses (including allocated overhead) of performances in the Powerhouse Theater are recovered by ticket sale revenues for such performances. Approximately 20-30% of expenses (including allocated overhead) in the Stiemke Theater are recovered by ticket sales for such performances.

9. The sole consideration in play selection for MRT is whether a particular play will fulfill the mandate of MRT's mission statement, not whether the performance will be entertaining or profitable.

10. MRT utilizes a variety of professional designers in its productions, including costume, lighting, scenic, and sound designers. A composer may also be required if original music is being done for a play.

11. In its various productions, MRT utilizes a core of professional actors who are members of its resident company. In order to identify appropriate individuals for guest actor roles, MRT occasionally utilizes casting services, for a fee.

12. MRT engages in the following activities designed to educate and familiarize audiences with its plays:

Printed materials: Prologue newsletter; Footlights program magazine; Study Guides and Play Guides; and Lobby exhibitions;

Presentations: "First-Nighter" opening night presentation series; "Talkback" discussion sessions following performances; "Backstage Briefing" and "Sunday Brunch" pre-show discussions;

Intern Acting Program:A training program for unpaid interns;

MRT's Community Education Department is responsible for developing programs and instructional materials that assist members of the community in having greater access to the activities and programs of MRT.

13. Tickets for MRT performances are sold only at MRT's main box office. A subscriber discount is provided to purchasers of multiple ticket packages. MRT endeavors to set ticket prices at a level that maximizes attendance.

14. MRT advertises its shows in newspapers, magazines and on radio, creating its own graphics and other advertising materials.

15. Newspaper and magazine advertisements produced by MRT for shows in the Powerhouse and Stiemke Theaters touted the performances as entertaining. MRT's advertisements included the following phrases, some of which were quotations from reviews of the shows:

"The [MRT] invites you into the magic of live theater;"

"The theater where even the most daring have fun;"

" audiences stretch their imaginations and enjoyment;"

"compelling play riveting production;"

"exciting new creative work;"

"everyone goes home feeling good;"

" entertaining insight ;

"fascinating drama;"

"Theater that defies description, defies limits and also defies gravity with its grand heights of passion;"

"powerful and alluring;"

"subscribers [to season tickets] will be treated ;"

"Brilliant Electrifying Remarkable;"

"Share the magical pilgrimage ;"

"Hilarious comedy;"

"spicier than any modern-day soap opera;"

"exotic flamboyant powerful;"

"The Milwaukee Repertory Theater presents an electrifying season of high voltage theater which will thrill our audiences;"

" one of Shakespeare's most magical romances ;" and

"visually beautiful and interesting wonderfully funny."

16. MRT also conducts special promotional shows, benefits, and cocktail parties to attract potential ticket purchasers and benefactors.


77.51 Definitions. Except where the context requires other-wise, the definitions given in this section govern the construction of terms in this subchapter.

* * *

(13) "Retailer" includes:

(a) Every seller who makes any sale of tangible personal property or taxable service.

* * *

(17) "Seller" includes every person selling, leasing or renting tangible personal property or selling, performing or furnish-ing services of a kind the gross receipts from the sale, lease, rental, performance or furnishing of which are required to be included in the measure of the sales tax.

* * *

77.52 Imposition of retail sales tax.

* * *

(2) For the privilege of selling, performing or furnishing the services described under par. (a) at retail in this state to consumers or users, a tax is imposed upon all persons selling, performing or furnishing the services at the rate of 5% of the gross receipts from the sale, performance or furnishing of the services.

(a) The tax imposed herein applies to the following types of services:

* * *

2. The sale of admissions to amusement, athletic, entertain-ment or recreational events or places ... and the furnishing, for dues, fees or other considerations, the privilege of ... having access to or the use of amusement, entertainment, athletic or recreational devices or facilities....

* * *


Tax 11.65 Admissions.


(a) The sale of admissions to amusement, athletic, enter-tainment or recreational events or places and the furnishing for dues, fees or other considerations, the privilege of access to clubs or the privilege of having access to the use of amusement, entertainment, athletic or recreational facilities are taxable. This includes admissions to movies, ballets, musical and dance performances, ball games, campgrounds, circuses, carnivals, plays, hockey games, ice shows, fairs, snowmobile and automobile races, and pleasure tours or cruises.


In rejecting MRT's claim for refund, the Department properly determined that the gross receipts from the sale of admissions to MRT performances in the Powerhouse and Stiemke Theaters were sales of admissions to "amusement" or "entertainment" events or places, within the meaning of Wis. Stat. § 77.52(2)(a)2.


MRT makes two assertions in support of its position. The first is that the primary objective of the theatrical performances at issue is educational in nature, thereby rendering their admission receipts not taxable as amusement, entertainment or recreational events or places. The second is that MRT is not a "retailer" with respect to the ticket sales for the theatrical performances at issue.

Were the admissions for entertainment, amusement, or recreation?

If MRT's disputed admissions receipts were to amusement, entertainment or recreational events or places, they are taxable under the clear language of the statute.

"Entertainment" is "something diverting or engaging: as a public performance."(2) "Amuse" is a synonym of "entertain."(3) "Recreation" is "a means of refreshment or diversion."(4) The theatrical performances in question were precisely that. They were public performances, promoted and advertised as shows that would "divert"(5) or "engage"(6) the ticket-buying public. MRT's performances were entertaining, amusing and recreational, and the Powerhouse and Stiemke theaters were places of entertainment, amusement and recreation. The language of the statute and administrative code is fulfilled.

MRT argues that the primary objective of the performances was to educate the audience. Even if education was MRT's primary objective as producer of the shows, the overriding thrust of its advertising and promotion of the shows, as well as the obvious objective of the public who responded by buying tickets, was "entertainment," "amusement," and/or "recreation" as those terms are commonly understood and defined.

Just as the dictionary defines "entertainment" with reference to people (the "public") who attend a performance, we do the same in applying § 77.52(2)(a)2. The terms "entertainment," "recreation," and "amusement" in § 77.52(2)(a)2 clearly refer to the objective of those paying the admission fees that comprise the gross receipts in question.

MRT's own advertising and marketing describe and even tout the

Powerhouse and Stiemke Theater performances as entertaining by using such words and phrases as "magic," "fun," "enjoyment," "exciting," "entertaining," "fascinating," "powerful and alluring," "will thrill our audiences," and "wonderfully funny." These are terms that describe amusement, entertainment and recreation, not education. MRT's marketing practices thereby acknowledge the entertaining nature of performances in the Powerhouse and Stiemke theaters. This is understandable because, as noted by the Department's expert witness, an associate professor of theater from Ohio State University, MRT must compete for the discretionary entertainment dollar in the public marketplace just as any other regional theater does.

Therefore, given the commonly accepted meaning of "entertainment," "amusement" and "recreation," and the nature of the disputed performances as confirmed by MRT's own promotion and advertising, we conclude that the receipts at issue are taxable within the meaning of § 77.52(2)(a)2. Even more clearly, they are taxable as admissions to "plays" under Wis. Admin. Code § Tax 11.65, supra. The educational mission and stated objective of the producer, MRT, are irrelevant.

Other Cases Distinguished

The facts and applicable law here are distinguishable from those in Historic Sites Foundation, Inc. d/b/a Circus World Museum, 11 WTAC 819 (1986), cited by MRT. There the Commission concluded that the "museum" objective of a state-owned historic site was controlling in determining that its admission receipts were not primarily for entertainment. In addition, an administrative rule in effect at the time excluded from sales tax admissions to museums of history,(7) and the Department did not tax admissions to any of the state's six other historic sites. Circus World Museum admissions were subsequently expressly excluded from taxation by statute.

This case is also factually distinguishable from Experimental Aircraft Association, Inc. and EAA Aviation Foundation, Inc. v. WDOR, 11 WTAC 830 (1986). There the Commission, without explanation, concluded that admission fees to a public area at the Association's annual "fly-in" at Oshkosh, Wisconsin were not taxable under § 77.52(2)(a)2. Activities in the public area included educational forums, films, workshops, exhibitions, and a "mini-museum," all dealing with various aspects of aviation. Unlike MRT's theatrical performances, those educational programs were not advertised and promoted to the general public as entertainment and amusement.

Was MRT a "retailer" with respect to the admission tickets?

Relying primarily on the Wisconsin Supreme Court's holding in Kollasch v. Adamany, 104 Wis. 2d 552 (1981), MRT argues that its sale of tickets is a fundamentally nonmercantile activity because it is an integral part of its nonprofit mission to educate audiences by illuminating the human condition.

In Kollasch, the Court concluded that Sisters in a religious order who sold guest meals at their retreat center were not retailers because of a "complete lack of mercantilism" in their meal-serving activities, which were an integral part of the Sisters' religious ministry. Id. at 572. The Sisters held no retail seller's permit.

We find no similarity between the religious activity of the Sisters in Kollasch and MRT's professional theater productions. In spite of its worthy educational mission, MRT is a sophisticated, non-profit mercantile enterprise, required to hold a retail seller's permit. MRT engaged in extensive commercial advertising and promotion of its performances and employed professional actors, designers, and other employees. For FY 1995 MRT's promotion and selling expenses alone were $407,818, mostly attributable to performances in the Powerhouse and Stiemke Theaters.(8)

As the Supreme Court pointed out, the Sisters in Kollasch charged just $82,808 for meals over a five-year period (1969-73) and promoted their retreat center through non-commercial means. In contrast, MRT's gross receipts from admissions to the Powerhouse and Stiemke Theaters alone for the four-year period under review (1991-94) were in excess of $5 million.(9) Promotional expenses for the Stiemke Theater alone for the three years ending June 30, 1995 totaled $53,057.(10)

Nor are the disputed admission receipts at all comparable to the incidental receipts from literature sales we found not subject to sales tax in American Heart Association v. WDOR.(11) Like the Sisters' meal receipts, and unlike MRT's theater admission receipts, the Heart Association's literature sales receipts were relatively small and were promoted through non-commercial means.

We therefore reject MRT's assertion that it was not a "retailer" within the meaning of Wis. Stat. § 77.51(13) during the period under review with respect to its sales of admissions to performances in the Powerhouse and Stiemke Theaters.


The respondent's action on petitioner's petition for redetermination is affirmed.

Dated at Madison, Wisconsin, this 15th day of December, 2000.



Mark E. Musolf, Chairperson


Don M. Millis, Commissioner


Thomas M. Boykoff, Commissioner



I agree with the majority's conclusion that receipts from performances in the Powerhouse and Stiemke theaters constitute sales of admissions to amusement or entertainment events or places within the meaning of section 77.52(2)(a)2 of the Statutes. However, I dissent from the result reached by the majority because I would have concluded that MRT does not fall within the definition of a "retailer" set forth in section 77.51(13) as construed in Kollasch v. Adamany, 104 Wis. 2d 552 (1981), and its progeny. Accordingly, I would have reversed the action of respondent on the petition for redetermination.

In Kollasch, the Supreme Court considered whether meals provided at or below cost by the Sisters of St. Benedict were subject to the sales tax. In working through this issue, the Supreme Court determined that the definition of "retailer" was ambiguous ( id. at 562-63) and construed the term to be limited to those engaging in mercantile transactions:

We conclude that the concept of "retailer" embodied in the sales tax statute does not encompass such fundamentally nonmercantile transactions as were engaged in by the Sisters on the facts in this case, and that any receipts derived therefrom are outside of the scope of the sales tax statute.

Kollasch, 104 Wis. 2d at 567-68. The Supreme Court went on to explain why the Sisters of St. Benedict did not qualify as a retailer:

Preparing, serving and sharing the meals here in question is as much a religious act as praying and equally untaxable. The complete lack of mercantilism in the activities shown in this record separates the Sisters from any definition of "retailer" contemplated by our sales tax statute.

What the record makes clear is that serving meals is not a means of supporting their ministry; it is an integral part of their ministry.

Id. at 572 (emphasis in original).

While the Sisters of St. Benedict were a nonprofit organization, the principle in Kollasch has been extended to profit-making concerns. In Frisch, Dudek & Slattery, Ltd. v. Dep't of Revenue, 133 Wis. 2d 444 (Ct. App. 1986), the Court of Appeals held that a law firm was not a retailer with respect to photocopies provided to clients at cost because these were not mercantile transactions. Id. at 448-49.

MRT is a tax-exempt corporation organized and operated exclusively for educational purposes. Its mission is to create theatrical experiences that explore and illuminate the human condition. Ticket sales do not come close to covering the cost of the performances at issue. As with the Sisters of St. Benedict, the performances at issue are not a means of supporting MRT's mission; they are MRT's mission.

The majority attempts to distinguish the instant case from Kollasch. In each case, the asserted difference is immaterial.

The majority points out that during 1995 MRT spent more than $400,000 in promotion. While promotional expenses might ordinarily indicate a mercantile nature, in this case it is entirely consistent with MRT's purpose. MRT could not accomplish its mission if it performed to an empty house. Promotion is absolutely necessary if MRT is to effectively pursue its mission.(12)

The majority also notes that MRT is "sophisticated;" employs professional actors, designers, and other employees; and has revenues many times that of the Sisters of St. Benedict. These facts are likewise of no import. Nothing in Kollasch or its progeny contemplates that only small charitable enterprises or "mom 'n' pop" ventures might be excluded from the definition of retailer based on the nonmercantile nature of their sales transactions. In fact, the taxpayer in Frisch, Dudek was at the time a well-known and successful law firm, certainly not a mom 'n' pop enterprise.

Similarly, the majority juxtaposes the religious activity of the Sisters of St. Benedict in Kollasch with MRT's activities. Nothing in Kollasch or its progeny limits the application of the Kollasch principles to religious organizations. In fact, Frisch, Dudek involved a law firm with no stated eleemosynary purpose.

Equally puzzling is the majority's statement that MRT held a retail seller's permit. In American Heart Ass'n v. Dep't of Revenue, 1998 Wisc. Tax LEXIS 22 (WTAC 1998), the Commission explicitly held that the fact a taxpayer was liable for sales tax on one set of transactions did not prevent the Commission from concluding that the taxpayer was not a retailer under

Kollasch for another set of transactions. Id. at 18-19.

I am sympathetic to respondent's position and its apparent efforts to limit the application of Kollasch. However, while I may not agree with the result in Kollasch, it remains the law in Wisconsin and I am obligated to follow it.

Respectfully submitted,

Don M. Millis, Commissioner

1 All facts pertain to the period under review unless otherwise stated.

2 Webster's Ninth New Collegiate Dictionary (1991).

3 Id.

4 Id.

5 "to give pleasure to esp. by distracting the attention from what burdens or distresses" Id.

6 "to hold the attention of" Id.

7 The Commission found the Department's rule unclear as to whether the professional entertainment provided at Circus World Museum subjected its admission receipts to taxation. Without clear and express language, a tax cannot be imposed. National Amusement v. Dept. of Revenue, 41 Wis. 2d 261, 267 (1968).

8 See, MRT FY 1995 Financial Statements.

9 Assuming the disputed refunds were 5.5% of receipts.

10 See, MRT FY 1993-1995 Financial Statements.

11 Wis. Tax Rep. ¶ 400-379 (CCH) (WTAC 1998).

12 Many churches promote their services in newspaper and Yellow Page advertising. Would such acts necessarily make an otherwise exempt transaction mercantile in nature?