An overflowing crowd of local business owners attended Tuesday night’s Gatlinburg City Commission for the first vote on an amusement tax that would apply to admission for movies, shows, festivals, concerts and nightclubs. This new taxing power is limited but was granted to the city by the Tennessee General Assembly in 2002.
Local amusement owners spoke against the proposal, while several restaurant and hotel owners approved of the measure. Commissioner Mike Werner amended the original tax rate of 1.5% to 2% with unanimous consent of the commissioners and the commission then passed the measure on first reading 5-0.
The tax, if passed on second reading, will add 2% to the cost of an attraction’s tickets or cover charge. A $10 ticket would have a state sales tax of 70 cents, local option sales tax of 25 cents and now 20 cents for amusement; the total ticket cost would be $11.10.
The new tax has heavy restrictions in its use. The funds generated are required by Tennessee law to be split between the city’s advertising budget and capital improvements budget. Commissioners expressed the belief that these new funds would be additions to those current budgets and would be used to strengthen the city’s attractions. The tax cannot be applied to coin operated machines such as arcade games, machines of that nature are taxed exclusively by the state under laws passed in 2002.
Joe Wagner was not satisfied with the commission’s lack of an answer as to which specific commissioner had asked for the item to be placed on the agenda. He noted the total tax on amusements would now be 11% and questioned the timing of the new tax, “I don’t think it’s been hidden, but if it has the secret is out now, this has not been a good year for us.”
Hotel owners pointed out that they currently charge 12.5% in taxes because of a 3% hotel tax. Restuarants charge a priviledge tax of 1.5% on top of the state sales tax. Both groups expressed the opinion that it was time for the amusements to pay their fair share.
Werner made his amendment raising the proposed tax to 2% after inquiring about the projections for the revenue. Originally figured at 1% and a $450,000 return, the 2% would be above $800,000 to be split between advertising and improvements. “We need those advertising dollars to compete,” said Werner.
The ordinance will come for a second and final reading on October 7 and if passed will go into effect on December 1, 2003.

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