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Thread: NY Court Ruling could result in Audit of Every NY Strip Club ...

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    Default NY Court Ruling could result in Audit of Every NY Strip Club ...

    ... because, thanks to this court ruling, there is a sh#tload of additional tax revenue waiting to be collected ...

    (snip)"
    ALBANY -- While a lap dance might prompt a strong reaction from an audience, it doesn't rise to the level of art -- at least according to a state appellate court.

    Thursday's ruling said entertainers at a local strip club are subject to sales taxes, and their expressions are not considered choreographed artistic performances that would be exempt.

    Nite Moves, an adult "juice bar" on Route 9 in Latham, has been fighting the tax law -- first in an administrative hearing and then in court -- following a 2005 audit by the state Division of Taxation that concluded the club owed nearly $125,000 in sales tax, plus interest for door admission charges and private dance sales. The Appellate Division of state Supreme Court upheld that decision in an unanimous opinion.

    Patrons at Nite Moves "view exotic dances performed by women in various stages of undress," the decision said. Revenue is generated from admission charges, "couch sales" -- the fee charged when a dancer performs for a customer in one of the club's private rooms -- as well as register sales from the non-alcoholic beverages sold and house fees paid by the dancers to the club.

    Nite Moves is operated by 677 New Loudon Corporation, which after the audit sought a determination at a hearing by an administrative law judge. New Loudon contended the dances "both on stage and in the private rooms qualified as 'dramatic or musical arts performances'," making them exempt under the state's Tax Law.

    The hearing officer agreed that the door charges and private dance fees were not taxable. The Tax Division filed the case with the Tax Appeals Tribunal, which reversed the hearing officer, concluding the sales tax could be imposed under subdivisions of the state law. The club's management then filed a so-called Article 78 proceeding challenging the Tribunal's determination.

    Associate Justice John C. Egan Jr. wrote a nine-page ruling that cited numerous elements of tax case law and went into exhaustive detail defining aspects such as dramatic or musical arts, choreography and whether Nite Moves qualified as a "place of amusement."

    "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,'" he wrote.

    The club sought expert testimony from a cultural anthropologist who researched the field of exotic dance, visited the club and reviewed the dances depicted on the Nite Moves DVD. She offered an opinion that "the presentations at Nite Moves are unequivocally live dramatic choreographic performances."

    The unnamed expert further concluded that the private dances performed at the club, such as lap dances, involved "similar kinds of movements" as those portrayed by the dancers on stage and therefore also "qualified as choreographed performances."

    The five-member court disagreed. The record from the Tax Tribunal hearing showed the club's dancers were not required to have formal training and relied on videos or suggestions from other dancers "to learn their craft."

    The appellate court found no merit to the club's argument, and lacked sufficient proof to sustain a tax exemption. The dances offered at the club "did not constitute 'live dramatic or musical arts performances' within the meaning of the statute," the court held.

    Further the court said there was nothing in the record to suggest the taxing was being applied in a discriminatory manner."(snip)

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    Default Re: NY Court Ruling could result in Audit of Every NY Strip Club ...

    If it was up to me I would ban vocal music in strip clubs. It always feel like there's a third party involved if I have to listen to some record singer or rock singer or country singer or rap singer or whatever door-knob is blasting through the speakers.

    Just my 2 cents about "art".


    Just kidding.......
    Last edited by bucket; 06-10-2011 at 11:00 PM. Reason: edit

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    Default Re: NY Court Ruling could result in Audit of Every NY Strip Club ...

    ^^^ well, the club's attorney's attempted argument about exotic dancing legally being considered as a 'live art performance' failed to pursuade the judges !!! As such, Broadway Show tickets will remain exempt from NY sales tax while strip club cover charges / private dance charges / VIP room charges will not. The judges' decision was based on the supposed fact that becoming a qualified performer in a Broadway Show requires specific educational and performance requirements ... whereas being qualified to become an exotic dancer does not.

    The larger question of far greater interest to the NY state tax agency is collecting the 9% sales tax that is now due on every cover charge / private dance / VIP sold at the club.

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    Default Re: NY Court Ruling could result in Audit of Every NY Strip Club ...

    Quote Originally Posted by Melonie View Post
    ^^^ well, the club's attorney's attempted argument about exotic dancing legally being considered as a 'live art performance' failed to pursuade the judges !!! As such, Broadway Show tickets will remain exempt from NY sales tax while strip club cover charges / private dance charges / VIP room charges will not. The judges' decision was based on the supposed fact that becoming a qualified performer in a Broadway Show requires specific educational and performance requirements ... whereas being qualified to become an exotic dancer does not.

    The larger question of far greater interest to the NY state tax agency is collecting the 9% sales tax that is now due on every cover charge / private dance / VIP sold at the club.
    This is going to get really stupid.

    Is the question whether a LD is art, or a stage show art?
    Last edited by bucket; 06-11-2011 at 12:05 AM. Reason: edit

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    Default Re: NY Court Ruling could result in Audit of Every NY Strip Club ...

    ^^^ the question WAS whether or not an LD is a 'professional artistic performance' under NY tax law ... which the judges decided that it was not based on no special educational or training credentials being required to work as a 'stripper' ( as compared to a Broadway dancer, for example ). Thus clubs / 'self-employed' dancers are now liable for the collection of NYS sales taxes and subsequent payment of those taxes to the NY state tax authority. If clubs / 'self-employed' dancers now fail to charge NYS sales tax from club customers, under the appellate court ruling they are STILL responsible for paying the required amount of sales tax to NY state.

    In the case of strip clubs, NY state will undoubtedly try to collect 9% tax from the clubs for door cover charges, VIP room 'rentals' etc.
    As to who is responsible for the 9% NY state sales tax now due on lap dances as well, that will indeed be a 'messy' issue !!! In clubs where customer private dance payments are run through the club's cash register, it will undoubtedly be the clubs ... thus the very high probability of NYS tax audits of virtually every NY strip club to force payment of the sales tax on top of income tax. In clubs where the customer pays the dancer directly for private dances, such that the clubs don't record the transactions, the clubs will undoubtedly make the argument that it is the sole proprietor businesses operated by the dancers that are responsible for the sales tax - which will similarly lead to NYS tax audits of 'self-employed' dancers.

    No matter the particulars, it's still significant that NY state just 'cut themselves in' for 9% of private dance / VIP money. The next issue will be how the additional 9% sales tax actually gets paid for ... by increasing prices 9% i.e. make club customers pay the sales tax, by clubs eating the 9% 'loss' while leaving cover charges, VIP rates and private dance prices the same, by clubs and dancers sharing the 9% 'loss', or by dancers being stuck with the lion's share of 9% sales tax liability.

    From a raw dollars standpoint, NY state tax authorities previously only had the motivation of collecting a 6-7-8% state income tax on the PROFITS of strip clubs and dancers ... which probably only translates into 3-4% as measured against total dollar sales volume. Now, as a result of this appellate court ruling, they can increase tax revenues versus total dollar sales volume from 3-4% to 12-13% i.e. triple or quadruple the previous level. This constitutes 'low hanging fruit' in a state that is technically bankrupt and in desparate need of additional tax revenues.

    ~
    Last edited by Melonie; 06-11-2011 at 11:26 AM.

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    Default Re: NY Court Ruling could result in Audit of Every NY Strip Club ...

    It sounds like NY state has decided which way the economy is headed -it will steadily decline. I think it will too. They will definitely go after a % of the door charge and VIP "rental."
    As you said the LD issue is a mess no matter how you look at it.. Ugh....
    In tough economic times people don't really want to stay home, they learn to budget and the entertainment business should evolve to suit the customers and employees. I don't think the people who run strip clubs at this time have enough sense to know how to atract more customers and help the economy. Babe parades, T-shirt promos, ATM's in the club? It ain't working fellas.

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    Default Re: NY Court Ruling could result in Audit of Every NY Strip Club ...

    ^^^ well, they're certainly not going to attract more customers by raising cover charges / VIP charges / LD prices by 9% to cover this new sales tax application. My guess is that the clubs will simply ignore the issue ... the audits will proceed in earnest ... and when the clubs are hit with bills for unpaid state sales taxes they will try to 'dump' a major portion of that tax liability on the dancers. My opinion is based on the somewhat unusual 'strip club business model' used in most NYC clubs i.e. charging dancers a very high 'fixed' house fee ( sometimes hundreds of dollars per shift ) while allowing the dancer to directly transact with club customers and keep 100% of customer money paid for LD's etc. If the club was using a 50%-50% split business model, with the club transacting with the customer and with the club retaining 50% of customer LD payment money, this argument would be far more difficult.

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