Thursday, November 1, 2012

Lap Dancing Is Taxable ... Now That's Revenue!


The State of New York's highest court, the Court of Appeal, has decided, but only by a 4-3 majority, that the admission charges and private lap dance performance fees that Nite Moves, a strip club in Albany, collects from its patrons are not exempt from sales taxes.
In their judgment, the Court majority pointed out that New York State collects taxes from a wide variety of entertainment and amusement venues. In particular, the tax code imposes a sales tax on "any admission charge" in excess of ten cents for the use of "any place of amusement in the state," defined as "any place where any facilities for entertainment, amusement, or sports are provided".

An exemption is, however, created to exclude from taxation the admission charges for "dramatic or musical arts performances … with the evident purpose of promoting cultural and artistic performances."

In this case under discussion, the strip club petitioner claimed that the state legislature intended, under the exemption, to give the adult entertainment business a tax break because the exotic dances that are featured at its premises qualify as dramatic or musical arts performances, rather than as more generalized amusement or entertainment activities that fall within the tax.

However, the majority of the judges disagreed with the petitioner and agreed with the New York State Tax Appeals Tribunal, finding that the club had failed to prove that its fees constituted admission charges for performances that were dance routines qualifying as choreographed performances, on a par with ballet or the musicals on Broadway.

It was not irrational, it was said, for the Tribunal to conclude that a club presenting performances by women gyrating on a pole to music, however artistic or athletic their practiced moves are, are not qualifying performances entitled to exempt status. To do so, the Court concluded, would "allow the exemption to swallow the general tax, since many other forms of entertainment not specifically listed in the tax regulation would claim their performances contain tax-exempt rehearsed, planned or choreographed activity."

However, the dissenting judges looked at the ruling of the Tribunal, which the majority upheld, as making a distinction between "highbrow dance and lowbrow dance" that is not to be found in the governing regulation and therefore "raises significant constitutional problems".

The dissenting judgment agreed with the club in pointing out that, in the regulation, "choreography" includes all "dance routines" - it does not matter what kind of dancing is being done.

"Thus, the only question in the case is whether the admission charges that the State seeks to tax were paid for dance performances," it stated. "There is not the slightest doubt that they were. The people who paid these admission charges paid to see women dancing. It does not matter if the dance was artistic or crude, boring or erotic. Under New York's tax law, a dance is a dance."
It has been suggested that the case will now proceed all the way to the United States Supreme Court.

 State Tax Problems?

Contact the Tax Lawyers at Marini & Associates, P.A.
for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).



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