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On November 17, 2021, the Pennsylvania Supreme Court unanimously held that concert tickets are personal property, not services, for gaming tax purposes. In doing so, the Court ruled in favor of the taxpayer—finding that the value of the concert tickets are excludible from taxable gaming revenues. While this decision will have a direct impact on the handful of casinos in Pennsylvania that are subject to tax under the Gaming Act, the case may also have broader implications that impact taxpayers subject to other Pennsylvania taxes such as sales and use tax or corporate net income tax.

In Greenwood Gaming & Entertainment, Inc. v. Commonwealth,1 the Pennsylvania Supreme Court unanimously held that concert tickets are personal property for gaming tax purposes, and may therefore be excluded from taxable gross terminal revenue (GTR) and gross table game revenue (GTGR) under the Gaming Act.2 The Gaming Act allows deductions from GTR and GTGR for personal property provided to patrons, but not services. The Commonwealth argued that the true object of concert tickets is to access a service (i.e., a concert), but the Court rejected this argument.

This decision will only have a direct impact on the handful of casinos in Pennsylvania that are subject to tax under the Gaming Act. However, the case may have broader implications that could impact taxpayers that are subject to other taxes such as sales tax and corporate net income tax.

Concert tickets – personal property, an intangible right, or a service?

In 2014, Greenwood Gaming & Entertainment, Inc., operator of Parx Casino, distributed various promotions and giveaways to patrons who played its slot machines and table games. The giveaway items included tickets to attend live concerts and entertainment performances. Greenwood filed a refund petition seeking to exclude a portion of the price it paid for the concert tickets from taxable gaming revenue.

Under Section 1103 of the Gaming Act, GTR and GTGR, are similarly defined as “cash or cash equivalents received . . . minus . . . any personal property distributed to a player as a result of playing [the] game”, not including “travel expenses, food, refreshments, lodging or services.”3

Greenwood claimed that a portion of the costs paid to purchase concert tickets for giveaways should be excluded from the casino’s gross revenue because the tickets were personal property as defined by the provision.

The Commonwealth argued that the tickets constituted services—and thus were not deductible—because they merely conferred the right of admission to the event and the performance itself is a service. The Commonwealth also asserted that such a finding was consistent with the “essence of the transaction” or “true object” tests as the primary purpose of the tickets was to view the concert. The Commonwealth further relied on a 2015 Department bulletin stating that “promotional giveaways involving services such as venue services and event tickets are not deductible” under the gaming tax, but the bulletin did not provide any further explanation or reasoning.4

Both the Board of Appeals and the Board of Finance and Revenue denied Greenwood’s refund.5 The Board of Finance and Revenue concluded that “the tickets claimed by [Greenwood] are for admission to concerts, and . . . are services for purposes of § 1103”—therefore, the concert tickets are explicitly included as revenue.

In a reversal on appeal, the Commonwealth Court, in a split decision, concluded that the concert tickets did not constitute services—but rather an intangible right—and found Greenwood was entitled to exclude the tickets’ value from its gross revenue. The Commonwealth appealed to the Pennsylvania Supreme Court.

In its opinion, the Pennsylvania Supreme Court agreed that the concert tickets were excludible from taxable gaming revenue but instead found the tickets constituted personal property. While the Court acknowledged the Department’s bulletin on the issue, it sidestepped the guidance and instead grappled with the statutory language in the Gaming Act. In doing so, the Court refused to use the true object or essence of the transaction test because the gaming tax statute does not expressly provide for such.

Rather, the Pennsylvania Supreme Court concluded that concert tickets fit comfortably within the definition of personal property, and not within the definition of services. While the Court recognized that tickets provide a right to attend a concert, it found concert tickets were personal property because “the physical tickets themselves can be moved freely or transferred by their owner to another and have an inherent value” and “often retain substantial value as memorabilia” after a concert. The Court also specifically found that a concert performance cannot be a service because the entertainer is not performing a helpful act and that entertainment is not personal in nature like other services.