By Yellowdune456 – Own work, CC BY-SA 4.0
Originally published on Forbes.com.
Going to a strip club is not something that is edifying, but contemplating tax litigation surrounding one can be. 677 New Loudon Corporation d/b/a Nite Moves and its principals, Stephen Dick and Stuart Cadwell were back before the State of New York Appeals Tribunal arguing about whether what their employees do on stage or in private rooms qualifies as “dramatic or musical arts performances” which would exempt their charges from sales tax under New York State Tax Law § 1105(f)(1).
The Anthropologist
The decision is one of the most scholarly tax decisions I have ever read. There is a report cited by Judith Lynne Hanna Ph.D.
Dr. Hanna concluded that the shows at Nite Moves during the audit period were live, dramatic, musical choreographed performances in a theater, presenting shows composed entirely of dance routines.
Dr. Hanna fleshes the theory out a bit more in an article titled “Toxic Strip Clubs” – The Intersection of Religion, Law and Fantasy.
Generally there is a three-song performance in which the dancer appears on stage clothed for the first song, partially removes her clothes during the second, and as the climax of the dance. strips to nudity at the end. In part two. for a fee a performer dances for individual patrons next to where they are seated (or in lap dancing a performer dances on, straddling, or between a patron’s legs). The dancer acts out through body and facial movement, proximity, and touch, the fantasy of “I am interested in you; I understand you; you’re special and important to me.” Patrons are generally aware that their purchased “commodity” is a license to dream.
Interestingly, she puts a feminist spin on the whole thing.
Consequently, exotic dance is perilous to the patriarchal social order : the “ungodly” exotic dance clubs destroy femininity and undermine men. “Passive,” “modest” woman steps out of the domestic realm into the “demimonde” public arena where she shamelessly removes her clothing and moves her nude, or semi-nude, body for sexually enticing commercial purpose and economic independence. Moreover, single dancers compete in sexual appeal with married women and economically with men, in effect challenging their sense of masculinity.
This is in sharp contrast to the radical feminist critique of strip clubs and similar phenomena, which are viewed as upholding patriarchy.
Men increase their individual and collective power through all-male group-bonding, which creates relationships and networks through which they pass along opportunities and knowledge. This power-sharing over misogyny is often contextual, such as business deals that take place in strip clubs or where business trips” are organized around or include buying prostituted women, where the women performing are economically coerced and exploited, and where female associates are either not invited or do not feel comfortable so are unable or unwilling to participate, and are denied opportunities that are in effect only available to men.
But dammit, Jim, I’m a tax blogger and a male one at that, so I’ll just move on to the next scholar.
The Dance Expert
Then there was Katherine Liepe-Levinson PhD, a highly skilled dancer who trained in ballet and worked as a choreographer. Her doctorate is in theater and she is the author of Strip Show: Performances of Gender and Desire.
Dr. Liepe-Levinson concluded that Nite Moves was a theater because it had a marquee with the name of the establishment; charged admission to the performance space; had a designated stage with lighting and props; few distractions for patrons; and a house protocol that encouraged the audience to focus on the performers. She believed that the exotic dances performed at Nite Moves were choreographed arrangements of steps or moves that included repetition and a clear beginning and end point, set to music. Routines utilized costumes and moves associated with the exotic dance genre as well as other genres; improvisation within set structures; and props like chairs and poles, used to focus and limit movement. Dr. Liepe-Levinson noted how the larger dance community commonly incorporates elements of exotic dance into its productions, highlighting the artistic merit of the genre. She does not believe that the sexual “turn on” aspect of the dance renders its choreography moot.
The Gymnast
Then there was Sabrina Madsen who has coached gymnastics at the recreational and competitive levels. She is a certified personal trainer, a bodybuilder, and holds a master’s degree in sports medicine. She competes in pole dancing, which is apparently a thing.
Ms. Madsen opined that her experience with pole dancing competitions taught her that the sport has components of pole tricks and dance, both of which are part of the judging criteria. Ms. Madsen was shown the various stage videos from Nite Moves and the music video of Alize, a Nite Moves dancer. She described the pole moves and dance steps in great detail for each and concluded that both gymnastics and pole dancing have components of acrobatics, skills and dance choreography.
Others
There was also testimony from someone who ran a dance studio, who, they did not say how managed to observe what went on in the private spaces and opined that that was also dancing.
Steve Barnes broke the gender barrier in the expert group. He is an entertainment critic from the Albany Times Union.
Mr. Barnes observed the stage show and then paid for a lap dance. After his observations, Mr. Barnes concluded that “there’s no question that the dancing at Nite Moves is art, which is most broadly defined as anything created with aesthetic intent.”
Still, It Did Not Go Well
A lower court had kind of a split the baby ruling that the general admission charges were exempt but that the private dance fees were not. The latter is where the real money is.
The appellate court agreed that the private dance fees were taxable.
From these descriptions, it is clear that the rooms for the private performances do not constitute a theater, hall or place of assembly, as such venues, by definition, require a public performance and the primary reason that Nite Moves customers pay extra for a private performance is privacy, i.e., the lack of additional people in the audience. Furthermore, the rooms for the private performances are physically too small for an audience, nor do the rooms have a stage or theatrical lighting, only a couch. Thus, the charges for the private performances, considered alone, do not qualify for the exception from taxation
The appellate court disagreed with the notion that the general admission fees were exempt. The admission got you not only the show on the stage but also the right to pay for private dances.
Framing it that way, it doesn’t matter whether what is going on up on the stage is art or not.
A Surprising Admission
The case is well worth reading with some interesting observations on the exotic dancing industry. You may be shocked to learn this but it turns out the club owners and the dancers are mainly interested in getting money from the patrons. Who knew?
Mr. Dick stated that the ultimate goal at Nite Moves was and is to entice customers to purchase private dances, saying, “deally, … I would like every customer to spend as much money as possible.” This goal was repeated by one of the dancers,Taylor, who stated that her goal was to create a fantasy for customers during her stage dance so that they would buy a lap dance or private dance, because her best opportunity to make the most money resided in the latter.
The more surprising admission concern the personnel of the New York Department of taxation.
The supervising auditor assigned to this audit, Mr. Haher, had significant prior personal experience with Nite Moves and its various offerings. He stated that he had purchased private dances at Nite Moves and that they entailed entering one of the small, back rooms with the dancer, having her press a timer button, covering him with a protective cloth to prevent makeup or perspiration from soiling his clothes and then grinding and rubbing herself over his body.
Other Coverage
In perhaps a sign of increasing maturity, this decision has not taken the tax blogosphere by storm. There is a good bit of other coverage though. Marie French of the Albany Business Review interviewed principal, Stephen Dick Jr. He indicates that he will continue the fight in part over First Amendment principles, but also because the tab has now grown so high that it will put him, his partner, and the corporation under if they lose. This is an illustration of Reilly’s Tenth Law of Tax Planning – Once the tax is more than you can pay, it might not matter how much more.
Robert Gavin has something in the Albany Timesunion. Joel Stashenko of the New York Law Journal had a clever title – State Tax Appeals Board Strips Club of Its Partial Tax Exemption which gets to the heart of the decision.
“There is no evidence in the record before us indicating that there was any means by which a customer could purchase a private performance, without paying the front-door admission charge first,” the panel ruled. “Under these circumstances, it is not possible to consider the front-door admission charge as a separate admission charge applicable to the lounge area only.”
Nick Canedo on NYup.com evoked the deja vu all over again sense of the story – ‘Artistic’ dancing: Upstate NY strip club loses again in 10-year tax fight.