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What is Entertainment Tax?

Keith Koons
Keith Koons

An entertainment tax is a fee that some local or regional governments charge on any form of service that is designed to provide consumers with leisure activities. Different areas of the world define "entertainment" in vastly different ways; some tourist areas collect an entertainment tax from every business within the local area. In general, however, this term normally applies to activities like attending movies, carnivals or fairs, sporting events, or any other event designed to provide pleasure. Tax on entertainment can be charged to the consumer, the business providing the service, or independently to both parties in certain regions. Taxation rates around the globe can vary between 2 and 17% for the consumer and 2 and 29% for the business involved.

The logic behind charging an entertainment tax is simple; it is a way for a government to collect additional revenues off of citizens or visitors with expendable income. An entertainment tax act is normally passed into law when a region sees high spending in various industries. Casinos, amusement parks, guided tours, or anything else that would entice a consumer to attend could fall under this type of taxation, but some regions also have more specific tax rates for these types of businesses as well. Some areas may even charge an entertainment tax on brothels or retail drug distributors if the services are considered legal and in demand.

Amusement parks often have to pay an entertainment tax.
Amusement parks often have to pay an entertainment tax.

Many areas of the globe are renowned for massive levels of tourism throughout the year, and an entertainment tax is a way to ensure that there is enough surplus money to keep roads, utilities, and other public services in top shape. The cities surrounding Walt Disney World in Florida, for example, charge a 6%-tax on entertainment for admission tickets, lodging, restaurants with live entertainment, and even some retail stores. This entertainment tax rate is on top of the existing sales tax within the area, so the costs can sometimes be substantial.

Some regions of the world also have entertainment-based tax rules that apply directly to businesses. Online casinos, for example, could bring in residents from all over the world. Since a governing body could not tax those citizens directly, many will instead choose to charge an entertainment tax on the business directly. This cost may be offset by the establishment or passed along to consumers, depending on the industry.

There are also some regions that allow entertainment tax write-offs for individuals or businesses forced to pay this tax while completing an aspect of their job. Meeting with clients at a sporting event, for example, may qualify as an authorized deduction. Some areas also have entertainment tax exclusions for children, handicapped individuals, fundraisers, or other specific situations where the additional costs would be an unfair burden on the attendees.

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    • Amusement parks often have to pay an entertainment tax.
      Amusement parks often have to pay an entertainment tax.