In point of fact, clubowners have sound business reasons ( from their own viewpoint ) for moving away from the club's credit card merchant account being used as an 'intermediary' between club customer credit card charges and dancer's purses ...This is why my club is moving away from funny money and encouraging dancers to use the square reader instead.
- every dollar received by the club's credit card merchant account will be counted as taxable club income by the IRS, unless the club can document that this customer money was paid out again for a legitimate business reason ( i.e. 'commission' payments to dancers ). Thus moving away from 'funny money', 'dance tickets', and other mechanisms which place the club's credit card merchant account between the customers and dancers saves the club a ton of financial record-keeping and 1099 payment reporting responsibilities ( and costs ) ... as the 1099 payment reporting responsibilities are transferred to the dancer's credit card payment processor.
- When the club accepts a customer credit card charge into the club's merchant account, that money doesn't actually get transferred for days or weeks. However, clubs are expected to almost immediately pay out cash to dancers in exchange for 'funny money', 'dance tickets' etc. This places the club at risk of a financial loss if the customer later refuses to pay and a 'chargeback' is created against the club's merchant account. When customer credit card charges are 'directly' transferred to the dancer, it is the dancer and not the club who bears the risk of financial loss if a customer later refuses to pay.
- When customer credit card charges are routed directly to the dancer via the dancer's credit card payment processor, this reinforces the perception that the dancer is in fact a self-employed 'independent contractor'. Besides offering an obvious advantage to the club in the case of a future 'employee dancer' lawsuit, this also reinforces club claims that new ACA 'employee health insurance' obligations / penalties do not apply to the club, but apply directly to the dancers.



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