The Taxman Cometh: Nonprofits Anticipate Effects on Ticket Sales
State of the Arts
Vermont’s leading arts presenters are bracing for a painful pinch from the state’s budget squeeze. Despite having many friends in high places, nonprofit organizations such as the Flynn Center for the Performing Arts and the Weston Playhouse appear powerless to prevent the scheduled April 1 implementation of a 6 percent state sales tax on their ticket sales.
“While very supportive of the arts, I think it’s appropriate for us to treat ticket sales this way,” says Speaker of the House Shap Smith. “I don’t see how it can be stopped.”
State Rep. Suzi Wizowaty of Burlington concedes that her effort in the legislature to delay imposition of the tax is likely to fail, even though it has the pledged support of 64 of the House’s 150 members. “You don’t go against the leadership,” the Burlington Democrat says, noting that the tax is backed by Gov. Peter Shumlin and House Committee on Ways and Means chair Janet Ancel as well as by Speaker Smith.
The measure in question clarifies and refines an existing — but confusing and largely unenforced — requirement that nonprofit groups charge state sales tax on certain ticket sales. The provision due to take effect in two weeks will apply to the 30 or so Vermont nonprofits that sell at least $50,000 in tickets a year. Ancel estimates that the levy will raise about $700,000 in annual revenues at a time when many state programs are teetering on the edge of a budget chasm.
The Vermont Arts Council has been organizing opposition to the tax initiative, but VAC executive director Alex Aldrich notes that his own board is split on the issue. Many members believe the arts should not be immune from the sacrifices being asked of most Vermonters, Aldrich says. “From a personal perspective,” he adds, “they just don’t see the harm. The reality of it is that a 6 percent tax isn’t going to change their buying habits.”? Ancel, a Calais Democrat, agrees that the impact will not be acute. “A $50 ticket is an expensive purchase, and when you decide to do it, a $3 tax isn’t going to change your mind,” she says.
Kevin Marchand, treasurer of the Champlain Valley Exposition, suggests just the opposite. “There’s a line for everyone where a ticket becomes too expensive,” he says. “An extra $3 is going to send some people over that line.”
It’s a myth to think the arts attract only affluent audiences, adds Lyric Theatre Company head Syndi Zook. She says her Burlington-area group “introduces families to musical theater at an affordable price point.” At least a few of those families won’t be able to buy the usual complement of tickets because of the tax, Zook predicts.
Flynn Center CEO and executive director John Killacky adds that some events at his theater, such as acrobats and circus acts, draw an economically diverse set of patrons. And working-class Vermonters who may not otherwise attend concerts do turn out for country stars such as Keith Urban at the Expo, Marchand notes.
Any form of sales tax is regressive, Wizowaty observes — meaning it makes no distinction between those more able and less able to pay it.
Some 40,000 children come to the Flynn annually in school groups, Killacky says. But Ancel points out that the tax measure exempts tickets sold to schools.
Killacky joins Marchand in reporting that economic conditions are already depressing ticket sales for many arts events. Justin Bieber sold out almost everywhere he appeared last summer, but not at the Champlain Valley Fair, Marchand notes. And Killacky says subscription sales for the Flynn’s 2010-11 MainStage series were down more than 20 percent from the previous year. The Vermont Mozart Festival, meanwhile, announced in December that poor ticket sales were forcing it off the stage after 37 years.
“To introduce a 6 percent sales tax at this moment just isn’t right,” Killacky declares. He notes that in the Flynn’s case the levy will actually amount to 7 percent, because of Burlington’s 1 percent local-option tax. But Killacky also acknowledges that if the economy continues to improve, “It can be argued that [the tax] isn’t going to cause much of a problem.”
Zook suggests that, while this particular tax may not have dire consequences, it does establish a disturbing precedent. “I feel this is the first step in eroding the time-honored tradition of tax-exempt status for nonprofits,” she says.
Ancel assures there’s no need to worry. “This isn’t a tax on nonprofits,” the Ways and Means chairwoman says. “It’s a tax on the people who buy tickets from nonprofits.”