Originally posted by JaTo:

The problem is that you're not thinking like a tax official. You're thinking like a bar owner.



What's good for the bar owner is good for the tax official, unless the bar owner is not reporting revenue. It doesn't matter to the tax official whether the revenue is coming in from the door or the alcohol. And the bar owner won't discriminate from the revenue source either.

Since the income tax is calculated on profit, it would be in the tax collector's best interest to allow the bar to operate in a manner that maximizes profit. If the bar didn't feel that having such a promotion maximizes profit, it simply would not run said promotion. Unless the tax collector knows for a fact that ladies' night hurts profits and is foring the bar to abandon that idea, in which case the tax collectors should be running the bars too.

In the case of sales tax collectors, are sales taxes even applicable to cover charges? Even if they were, cover charges are pure profit, whereas alcohol sales incur some cost of originally buying the alcohol, so from a sales tax collection POV, it'd be in their advantage to allow the bars to make a majority of their profits from alcohol sales (by offering some sort of free cover, and making up profits in alcohol sales) than it would be for them to make money from cover and sell less booze.

If I'm not making sense, it's because I'm a bit boozed up at this moment (and yes I had to pay cover at one of the bars)