Court Rules Lap Dances Just Bare-ly Miss Sales Tax Exemption

Michael Santo's picture

A strip club dancer may "perform," but it's certainly not a "dramatic or musical arts performance," said a New York State Appellate Division court, deflating the attempts of a club to get itself a state tax exemption.

The club, Nite Moves, was attempting to qualify for the state tax exemption in the city of Albany, New York. The club had been assessed a tax bill of close to $125,000 as well as interest. The bill stemmed from lap dances and admission fees for the club, and were assessed after a 2005 audit. The club's attorney, W. Andrew McCullough said on Friday that he would probably appeal the Appellate Division ruling. In addition, he added that Nite Moves has an even larger tax bill for a later assessment that it is also challenging.

The original ruling came from a Tax Appeals Tribunal. The exemption apparently fell under a statute for performances held at events where non-alcoholic drinks are sold. McCullough said that because of that, the ruling would have widespread impact. Most other locations with "exotic dancers" as entertainment are bars that sell alcoholic beverages; there, other tax rules apply.

The club went to great lengths to qualify under the exemption. They employed an expert witness, a cultural anthropologist who has studied exotic dance and visited Nite Moves. He testified during the hearing that even these strip performances are choreographed performances that should qualify for the exemption. However, McCullough admitted that "We admit the ballet is a little different and maybe a little more finely tuned."

The court ruled, "There is no question that the club qualifies as a place of amusement under the expansive definition set form in Tax Law. Hence, the issue distills to whether the club's admission and private dance fees constitute charges for admission to a 'live dramatic, choreographic or musical performance.'" In that way, the club failed to meet the requirement that the court decreed.

The court cited several reasons that Nite Moves failed to meet the requirements necessary for the exemption. For one, the court said, the "dancers" were not required to have any formal dance training. Additionally, a DVD of the onstage dances did not, in and of itself, show the onstage strip teases qualified as choreographed performances. Finally, and possibly most telling, the cultural anthropologist did not actually see the backroom private couch dances at Nite Moves, nor, of course, did he partake of any.

McCullough however, was unconvinced, despite the court's ruling. He cited First Amendment issues about free expression and adult entertainment, which still seems to fall short of lap dances and strip teases being a "dramatic or musical arts performance." Still he attempted to discount the court's ruling, saying, "It was purely and absolutely a value judgment. The state didn't put on any evidence of anything. This is a free-speech issue. The state doesn't get to be dance critic."

An average lap dance is $20. The combined state and local sales tax is 8.875 percent, so for the lap dance the club should charge $21.60. Meanwhile, average admission charges run $20-$30, so the club should charge $21.60 - $32.40 for admission, including taxes.

Image Source: Wikimedia Commons

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