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NY Top court takes on lap dance tax case

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New Jersey

Top court takes on lap dance tax case
Appeals Court to weigh whether local strip club's dancers are tax-exempt
By carol demare, Albany Times Union Staff writer
Updated 10:40 p.m., Monday, October 24, 2011

ALBANY -- The issue of whether lap dancing should be taxed is back again, and this time the state's highest court will decide the case of a Latham strip club.

The Court of Appeals granted a motion late last week by the corporation that operates Nite Moves to hear that its dancers are artistic performers, and therefore the club is exempt from state sales taxes.

The exemption applies to both the tax on the admission fee and the tax on lap dances, Nite Moves contends.

In June, a midlevel appellate court ruled unanimously that entertainers at the club are subject to sales taxes and their dances are not considered choreographed artistic performances that would be exempt.

For years, Nite Moves, an adult "juice bar" on Route 9, has been fighting the tax law -- first in an administrative hearing that ultimately went before the state Tax Appeals Tribunal and then in state Supreme Court. A 2005 audit by the state Division of Taxation 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 a motion before the Court of Appeals, Utah attorney W. Andrew McCullough, representing 677 New Loudon Corp., which operates Nite Moves, claimed the club was entitled to the sales tax exemptions on two levels, both of which define entertainment as "dramatic or musical arts performances."

Broadway and local theaters -- such as Proctors in Schenectady and the Palace in Albany -- do not charge state sales tax on their tickets, said Ed Walsh, a spokesman for the state Department of Taxation and Finance.

On Monday, McCullough, an Albany native, said, "I'm excited. It's been one of my things in life to get a case before the Court of Appeals. I think the Appellate Division blew it, and it looks like someone is finally listening."

Iin his motion brief, McCullough argued the Tax Appeals Tribunal and the Appellate Division misinterpreted the statute. He said the language in the tax statutes apply to the club.

The earlier decisions on the tax at Nite Moves is "content-based, as it is applied based on the distaste of the tribunal for the dance performances presented by petitioner," the club argued.

The top court will have to decide if the lower court misinterpreted the tax exemptions, or, if by taxing Nite Moves, it violates the club's constitutional rights.

Robert M. Goldfarb of the state attorney general's office represents the state tax commissioner, and in papers submitted to the high court argued there was nothing to suggest the tax was being applied in a discriminatory manner.

Also, Goldfarb said, earlier decisions ruled against Nite Moves because of the "inadequacy of its proof" and not the "nature of its business."

The Court of Appeals has not set a date for oral arguments. In 2010, the average time from the granting of the appeal to arguments was nine months.