Tax Court Rules That Strippers Are Not Therapists, Club Must Pay Tax

By:
Chris Gaetano
Published Date:
May 17, 2017
TaxWorry

A NYC strip club, Penthouse Executive LLC, claimed it was offering therapeutic services in a similar manner as a sex therapist, and that therefore its offerings should be exempt from sales tax, according to Accounting Today. A judge at the New York State Tax Appeals Tribunal in Albany, however, didn't buy that argument, as there was no evidence whatsoever that anyone in the business actually conducted these services. Another strip club tried a similar gambit in 2011: it claimed that its dances constituted performance art like ballet, though this argument was similarly unsuccessful, as there was no evidence that they were choreographed performances of the type that would be tax exempt. 

Penthouse Executive LLC also tried to argue that the "executive dollars" offered to customers to tip the strippers (essentially like a dirtier version of Disney Dollars) were not subject to sales tax, as they could not be used for admission to anything, be it a private room or the club itself (admission charges are subject to sales tax), and even if they were, private rooms were rented out from a separate company that happened to be in the main club. The judge, however, said that the executive dollars are taxable to the extent that they were used for personal dances, which constitute entertainment. Tax law defines an admission charge as “the amount paid for admission, including any service charge and any charge for entertainment or amusement or for the use of facilities therefor.”


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