Amusement Tax on Karaoke Bars Clarified

Section 125(B) of the National Internal Revenue Code of 1997 (Tax Code of 1997), as amended provides for an 18% amusement tax on proprietors, lessees, or operators of covered amusement places.
RMC No. 18-2010 clarifies the coverage and taxability of amusement places under Section 125(B).
RMC No. 18-2010 focuses on whether modern interactive entertainment venues fall under the amusement tax regime or the 12% VAT regime.

Section 125(B) is applied to ensure proprietors, lessees, or operators of amusement venues are taxed under the proper tax system.
RMC No. 18-2010 enjoins all concerned to be guided by its clarification.
RMC No. 18-2010 requires that it be given wide publicity to inform affected taxpayers.

Section 125(B) covers cabarets, night clubs, and day clubs for purposes of the 18% amusement tax.
Night and day clubs are described as drinking, dancing, and entertainment venues that oftentimes also serve food and provide entertainment.
Cabarets are described as restaurants or clubs where liquor and food are served, with a stage for performances by musicians, dancers, or comedians, including a venue for dancing by patrons/customers similar to that of nightclubs.

The amusement places covered by Section 125(B) are treated as including modern interactive entertainment venues that perform the same pleasurable diversion entertainment and function.
RMC No. 18-2010 enumerates amusement places that include videoke bars, karaoke bars, karaoke television, karaoke boxes, and music lounges.
Proprietors, lessees, or operators of the enumerated establishments are deemed subject to the 18% amusement tax under Section 125(B) when they provide entertainment comparable in diversion and function to covered venues.

RMC No. 18-2010 establishes that proprietors, lessees, or operators of covered amusement places are subject to the 18% amusement tax under Section 125(B).
RMC No. 18-2010 declares that these establishments are not subject to 12% VAT on gross receipts where the Section 125(B) amusement tax applies.
The determination is based on treatment as amusement places performing the same diversion and function as the covered categories under Section 125(B).

Proprietors, lessees, and operators of relevant amusement venues must apply the 18% amusement tax treatment under Section 125(B) as clarified.
All concerned are enjoined to be guided accordingly in applying Section 125(B) to relevant amusement places.
RMC No. 18-2010 requires that it be given wide publicity to ensure compliance and correct tax treatment by affected parties.