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NYC Lap Dances Not Tax Exempt

A New York City strip club fought to have lap dances classified as a form of art, making them exempt from state taxes.

The New York Court of Appeals, however, didn’t buy it.

Our New York City business lawyers understand club owners will have to fork over  a cut of the profits to the government, after the appellate panel ruled 4-to-3 that the club, Nite Moves, did not qualify for the same kind of tax exemption as do Broadway producers or ballet companies.

That means the club owes a lot of dollar bills to the tax man -$400,000, to be exact. The club owner is vowing to appeal the case to the U.S. Supreme Court.

The concern with regard to the First Amendment is the way we define art. As dissenting Judge Robert S. Smith indicted, the majority had essentially defined a choreographed performance to equal high-brow or “dance worthy of a five-star adjective.”

He compared the dance industry to the magazine industry. Stripping, he said was like Hustler magazine. Ballet, on the other hand, was like The New Yorker. Personally, Smith said he found both stripping and Hustler to be distasteful. He preferred The New Yorker. Still, he said he would be “appalled” if the state took liberties to tax Hustler but not The New Yorker, on the basis that the former is culturally relevant or artistic.

Discrimination on the basis of content, he said, is unconstitutional.

But unless the U.S. Supreme Court agrees to hear the matter, that is the bar that’s been set.

The case started back in 2005. The state’s Department of Taxation and Finance conducted an audit on the facility, and determined that Nite Moves needed to pay the state government a sales tax on all the money it collected via cover charges. It would also need to pay the government taxes on so-called performance fees.

These “performances,” also known as lap dances, often take place in private room, sometimes called “champagne rooms.” The club had attempted to argue that such performances were, in fact, choreographed. As such, the club owner contended, the X-rated shows are akin to a musical or dramatic performance.

Presented evidence included the suggestion that pole dancing was being considered as a possible Olympic sport, and that the court was essentially playing art critic. The dissenting judges agreed, saying that it doesn’t matter if the dance was boring or erotic or crude or artistic. The way New York’s tax code is written, dance is dance.

However, the majority argued that even ice skating, which is a form of dance on ice that is carefully choreographed, wasn’t entitled to a tax break from the Legislature. (Perhaps, one would argue, it should be.) But the majority judges determined that if ice skaters weren’t going to get a break, strippers certainly weren’t.

When Gov. Andrew Cuomo was recently asked about the case by a reporter, he shot back, “Is it bad news for you? It doesn’t matter to me.”

The Wright Law Firm is a business law firm located in Midtown Manhattan. Call (212) 619-1500 for a confidential consultation.


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