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Less Choreography, More Tax

June 12th, 2011 2 comments

Nite Moves, an adult “juice bar” located in upstate New York, learned on Thursday its revenues from lap dances and admission fees are subject to New York state sales tax.

Under NY tax law, admission charges are exempt from sales tax if the charge is for admission to “dramatic or musical arts performances.”  The definition for an “admission charge” is broad, and includes any service charge for entertainment or amusement or for the use of facilities therefor.  At Nite Moves, patrons view women performing exotic dances, either on stage or in some private locale.  Nite Moves viewed these dances as “dramatic or musical arts performances” and had not paid sales tax on revenues from door admission charges or private dance sales.

“Dramatic or musical arts performances” are defined under NY tax law as:

Any admission charge paid for admission to a theatre, opera house, concert hall or other hall of place of assembly for a live dramatic, choreographic or musical performance.

(Emphasis added.)  In order to make its decision, an Appellate court seated in Albany, NY, analyzed whether the exotic dances performed at Nite Moves fell under the scope of this definition.  The burden was on the taxpayer to establish that the exemption applied, and the court held the taxpayer came up short.

The court’s reasoning was based, in part, on the testimony of the taxpayer’s expert witness, who has conducted extensive exotic dance research.  Because the witness did not personally observe any private dances at Nite Moves, she couldn’t say whether the principles of exotic dance that could be considered choreographed performances were on display at Nite Moves.  To the court, this missing piece of information ended the taxpayer’s dance dodging from sales tax liability.

Well, maybe not so fast.  The club’s attorney said they intend to appeal the decision to the state’s highest court, the Court of Appeals.  I’d be very surprised if the court heard the case.  If it is heard, perhaps the expert witness should make a trip to Nite Moves.  (Note, however, the taxpayer may not be able to introduce additional expert witness testimony on appeal.)

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