Interesting question. I don't see how "Pinball Pendolino" could possibly be exempted from an entertainment tax.

Similarly, if murder-mystery events are subject to the tax, what would be the basis of exempting an onboard murder-mystery from the tax?

I also don't see a railroad could avoid the tax when passengers ride the train to and from an off-the-train event -- the D&SNG does many of those using its "Events Park".

Interesting. Pinball Pendolino was a program where you could play pinball on a moving train. Adds an interesting factor with the train rocking side to side, eh?

By history, the Zephyrettes (Hostesses) on the California Zephyr and the Denver Zephyr would organize parlor games while enroute. Would that make the fare from Chicago to San Francisco subject to an entertainment tax?

But that was in the 1960's when railroads were regulated at the State and Federal levels.

Since then we have gotten Penn Central, Amtrak, ConRail, the Staggers Act etc.

Passenger trains for transportation are largely operated by or for public entities and are not subject to Federal economic regulation. Some states may still regulate intrastate passenger railroads.

So, are rail passenger carriers subject to local "amusement taxes"? As a wise philosopher once said, "send lawyers, guns and money."

See The DEPARTMENT OF REVENUE, State of Colorado, Defendant-Appellant, v. DURANGO & SILVERTON NARROW GAUGE RAILROAD COMPANY, Plaintiff-Appellee. Colorado Court of Appeals,Div. II. No. 98CA0426. Decided: May 13, 1999

https://caselaw.findlaw.com/co-court-of ... 40820.html

Phil Mulligan

I think everyone who argues against the tax is doing it out of one of two positions:
1. Railroads good, taxes bad.
2. Taxes bad.

What I'm NOT seeing is a lot of arguments based in legal facts.

The fact of the matter is that a reasonable person without bias would clearly regard the train ride out of Jim Thorpe as an "amusement". It doesn't matter if it takes place on rails.

You get on the train, go for a ride, there's a narration, and you get off at the same spot.

It's functionally a Disney dark ride using standard gauge equipment. Add in any themed events like a train robbery and it's a no brainer.

The argument that it's "transportation" is a dead end except for those folks who might get off somewhere and ride a bike back. An argument might be made for that but it it'd only apply to a portion of ticket sales.

The argument that it's a common carrier railroad is a dead end too because the operation is INTENTIONALLY not run by the Reading and Northern but by the LGSR, a company setup specifically for the train's operation.

Andy knew what he was doing when he set it up that way and it's still a good idea (if for no other reason than, in this case, the LGSR can declare bankruptcy and shield the R&N's assets). He's a smart guy, which is why it's surprising that he didn't just do this the right way in the first place.

The problem here, and the lesson we should take away isn't that the town is unfairly applying a tax. The libertarian streak in many train people seems to predispose them to wanting to avoid these types of things but they need to come back to reality: taxes are the price of admission to a civil society.

The problem here is that, for some reason, the LGSR wasn't aware of the tax, that it applied, or was intentionally trying to ignore it. It didn't collect it or price it into its ticket prices. Now the bill has come due and they're trying to get out of paying it.

So, the lesson to learn: the world is a complex place and you need to do your due diligence when setting up your operation to make sure you're not blindsided by this type of thing yourself. Consult your lawyers, consult your accountants, and don't just wing it.

... And the accountants would say that it is not that easy to parse out out "railway operating revenue." It is one pot - so is it an amusement or is it common carrier?

Some of us don't have a choice in the "railroads - good; taxes bad" argument. My job is franchise protection, period. If someone encroaches on franchise, I'll have our attorneys hanging all over you like a cheap suit. It is what I am paid to do.

What Ed said.

Prior to planning anything from a new operation to a single event, three questions to act on in as few words as possible:

1. Is it legal?
2. Is it taxable?
3. Is it insurable?

Add more detail as required by circumstance. Know the answers to those three questions and it becomes less likely that you'll get any protruding body parts caught in a legal wringer.

Steve: From what I gather, LGSR was set up to run the excursions. That should make it even easier to separate out the income from ticket sales. Unless there's some over-riding state law that specifically exempts railroads from paying sales taxes, I believe this is likely a battle not worth the expense of fighting.

The wet blanket in the room,

While Jim Thorpe seems to be holding out for a negotiation, the train has literally left the station.....

https://www.wcexaminer.com/train-rides-back-1.2549205

Legalities aside, don't underestimate the ability of RBMN to litigate their point.

It's one thing when you're pretty much 'stuck' in a location, it's another thing when you have a bigger system that allows you to pick and choose alternatives.

Ed is 100% on point. I'm a tax accountant who specializes in sales tax and have dealt with a few amusement tax issues as well. I believe LGSRR is its own legal entity doing business within Jim Thorpe. Customers board and detrain at the same location so any interstate commerce exemptions would not apply. Even if not a separate legal entity, common carriers (RBM&N) would be subject to these type of tax obligations on intrastate (not crossing state lines) portions of applicable revenue. It's important to remember that this is not a tax imposed on the railroad, but rather a tax on the end customer. The railroad's obligation is to act as an intermediary between customers and the borough to collect and remit the tax. The only reason this $90K is coming out of the railroad's pocket is because they failed to collect the tax from the customer.

What does seem somewhat odd is that this tax has been in effect since the 1990's and this is just now becoming an issue. Apparently the railroad never registered for the tax. Being such a prominent business in Jim Thorpe and presumably one of the largest "amusement" operators in town it is very surprising that this was never addressed. It's not a small ma & pa business in town that slipped through the cracks. In fact, you MAY be able to make an argument that the borough's lack of prior action constituted affirmation that the tax was not applicable. That argument would be a stretch but its possible. Also, leaving town will not exonerate the tax obligation. The railroad will still be out the $90K. Going forward the tax would be passed through to customers so the net effect on the railroad would be the same whether they stay or leave other than perhaps an administrative burden. I've got to think there must be other factors going on behind the scenes driving these decisions.

But in the end if Strasburg doesn't have to pay why should they?

Different local jurisdiction, different taxing policy. Your mileage may vary. Seriously, we don't know, and probably will never know the whole story. Whether or not it's the whole story or even a partial explanation, It really feels like the $90K bill for back taxes is an opening negotiating tactic on the part of the borough to get something from the railroad they feel they are owed. Like any sales tax or tariff, the end payer is always the consumer. It's strictly a pass-through charge - unless the business collecting it failed to do so, which is what this is about. If in fact the borough did not pursue collecting the tax for many years, then a real case could and probably will be made that the railroad thought it didn't apply to them and they were blindsided by the retroactive charge. I certainly would be making that argument. Nobody but the town fathers know if they have this whole thing wired in advance, so that a judge is going to rule against the railroad and order them to pay the taxes and penalties, or if honest negotiating is possible.

Simple Answer - Strasburg isn't operating out of Jim Thorpe so it's irrelevant. It's a local tax statute. Local tax regulations can literally be different from one address to the next door neighbor.

I'm not at all Familiar with an amusement tax issue at Strasburg. Just a wild guess but the fact that you can get off the train mid point may be a factor. I think at one point you could theoretically board there as well making it a transportation service.

Here in PA, we have an amazing collection of oddball local taxes. The municipal amusement tax is just one. Every local area also has a different wage tax, most are 1%, but it can go up to 2.7. And it's where the employee lives (including nonresidents), not where the employee works, and has to be remitted to the county of the employer to pass out to all the various municipalities. So you can have virtually an unlimited number of local tax rates in your payroll system down to the village and township level. Now add occupational privilege taxes levied as annual amounts for school districts and wage districts, that can be waived if annual wages don't reach a threshold.

The amusement tax is similar, it's local, it's variable, and it's also somewhat inconsistent in application. A municipality can waive it if they choose by attraction - it's happened.

The only break you get as a railroad is no property tax as it's considered a public utility.

Berkheimer does nearly all of the local wage tax collection services for the municipalities as a contractor, including our own. They have made some fairly monumental mistakes with my employees, suing them for privilege taxes that were actually paid - simply because a W-2 can't show local wage taxes separate from local occupation taxes and a second W-2 is issued just for that withholding as a continuation sheet. Ohhhhh... So we all love Berkheimer. It was much easier to call the local tax collector personally to straighten out a mess.

Now put them against RBMN, who just spent nearly three years litigating the legality of issuing a shortline railroad RFP process and lost. But tied it up in court. And that one at least was headed to the PA supreme court last January. All interesting as a local PA battle, but I'd never hold any of this out as a state or national precedent for an excursion operation out of state.

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Well you’d have to narrow that down to round trip customers that literally do nothing in the city they end up in. Certainly they exist... as do airline customers that are just doing point runs. But the large majority of Amtrak customers are using it for transportation purposes.

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Again... there are many people who take mileage runs on airlines as well.

I'm not saying people don't take joy rides on Amtrak.. I've done it from Lancaster to Harrisburg and back and from Denver to Granby and back. But ride any Keystone train and ask how many people are taking a joy ride vs. transportation and you know as well as I do that it's going to be at least 90% and most likely close to 99%.

As someone who travels very regularly for work there are many times Amtrak makes as much sense as flying for me. But that's another topic I suppose. The large majority of people I meet on amtrak are using it for transportation.