Latham strip club continues to fight back sales tax

PHOTOGRAPHER: Peter R. Barber

Nite Moves Gentlemen's Club on Route 9 in Latham, September 8.

A long-running dispute about whether admission charges to strip clubs are paid for sales tax-exempt dance performances is expected to land back in the state court system after a recent ruling.

Nite Moves, a Latham strip club, has fought the state for years on the issue, arguing that the admission charges fall under a “dramatic or musical arts performances” exemption in state sales tax law.

The arguments went all the way to the state’s highest court four years ago, with that court finding against the club.

In the years since, club owners have used the high court ruling as an invitation to try again and bolster their case by going back through the tax appeal process with further evidence.

The state Tax Appeals Tribunal, an independent body created to resolve tax disputes, again ruled last month against the club.

But a club owner and its attorney say the ruling gives them hope in an expected appeal through the court system.

The ruling conceded that main stage performances fell under the “dramatic or musical arts performances” exemption, but that private dances did not. The private dances then negated the overall exemption, essentially putting the club back where it started, with a large back tax bill.

“We’re a bit disappointed that the tribunal did what they did,” Nite Moves attorney Andrew McCullough said Thursday. “We’re going to go after them again and we think that the factual record that we have right now is good enough for us to win this.”

The club has four months to file its appeal in court.

The long-running dispute initially arose after an audit by the state Department of Taxation and Finance concluded door admission charges and private dance sales at Nite Moves were subject to sales tax but no tax was being collected. The audit found the club owed more than $124,000 plus interest for proceeds taken between 2001 and 2004.

Nite Moves paid the taxes, but appealed the decision before an administrative law judge in 2009. In making the appeal, the club noted a section of tax code that states a sales tax is imposed on any “admission charge” for the use of any place of amusement in the state, except charges for admission to “dramatic or musical arts performances.”

The club’s evidence of the claim came from a number of submissions to the judge, including a DVD of pole dancing routines, video of two Nite Moves dancers performing and footage from the Miss Nude Capital District contest in 1998, featuring theme performances. The club also presented testimony from a cultural anthropologist and dance expert from the University of Maryland, who argued the performances incorporated “jazz-like, improvisatory movements in routines.”

An administrative law judge sided with Nite Moves, agreeing the dances constituted a form of art. But the state then appealed to the Tax Appeals Tribunal, which ultimately overturned the case based on a lack of evidence to prove the club’s assertions.

The state then successfully defended the case in the Appellate Division of state Supreme Court and the Court of Appeals, which narrowly rejected the argument posed by Nite Moves in October 2012. In a 4-3 decision, the state’s highest court ruled the lap dances are taxable because they don’t promote culture; dissenting justices claimed there is no distinction in state law to gauge the difference between dancing and that the case raised “significant constitutional problems.”

The fight even made Comedy Central’s “The Colbert Report” in late 2012, a segment cited in the latest tax ruling.

Latham’s Nite Moves on “The Colbert Report”

Nite Moves featured on “The Colbert Report,” November 8, 2012

The Colbert Report
Get More: Comedy Central

In the latest go-around, the club bolstered its argument by bringing in five experts, including one with a PhD in theater, to argue that the dances are lengthy, choreographed routines given for audiences.

Stephen Dick Jr., an owner of the club, argued Thursday that the tribunal overlooked evidence offered that patrons can obtain a private dance and leave without paying the admission, and that the two charges are separate.

Dick likened the ruling to a large music festival where the ticket price isn’t taxed, but other forms of entertainment might be offered inside. Because there are other forms of entertainment inside, doesn’t make the ticket price taxable.

“Whatever happens after that point is irrelevant,” Dick said.

Nite Moves has been collecting sales taxes based on the prior rulings, McCullough said. But there are still back taxes owed. Dick placed that amount, with interest, at more than $750,000.

If the latest appeals don’t work, Nite Moves and the state could come to a settlement to allow the business to stay open, Dick said. But Dick and McCullough said they hope that won’t have to happen.

“We think were really in the diver’s seat,” McCullough said. “and when we go to court we’ll be able to overcome the legal questions.”