Strip club takes case over fees to N.Y. high court

Jessica M. Karmasek Sep. 5, 2012, 12:45pm

Chief Judge Jonathan Lippman

ALBANY, N.Y. (Legal Newsline) - A strip club near Albany is asking New York's highest court to exempt it from a state sales tax on its admission fees and so-called "couch sales."

New Loudon Corporation operates a strip club under the name Nite Moves. The club, located in the town of Colonie, features exotic dancers.

Following an audit of the club in 2005, the state Division of Taxation determined that its general admission charges and the fees patrons pay for private dances -- referred to as "couch sales" -- are subject to sales tax.

In turn, it assessed Nite Moves $124,921.94 in taxes due, plus interest for the period from December 2002 through August 2005.

Nite Moves challenged the assessment, saying it was exempt from sales tax on admission fees to "any place of amusement" under Tax Law § 1105(f)(1), which exempts "dramatic or musical arts performances."

The club also claimed exemption from sales tax on charges of a "cabaret or similar place" under Tax Law §§ 1105(f)(3) and 1101(d)(12), which exclude "a place where merely live dramatic or musical arts performances are offered."

According to a New York State Court of Appeals case summary, Nite Moves relied largely on an expert witness, a cultural anthropologist specializing in exotic dance, who testified that "the presentations at Nite Moves are unequivocally live dramatic choreographic performances."

An administrative law judge sided with Nite Moves, crediting the club's expert and finding its admission and private dance fees qualified for the exemption for "dramatic or musical arts performances."

In particular, the judge said, "The fact that the dancers remove all or part of their costume... simply does not render such dance routines as something less than choreographed performances."

The Tax Appeals Tribunal reversed and reinstated the tax assessment.

In its decision, it gave little or no credence to the club's expert, who admitted she did not observe any private dances, and ruled the club failed to prove its exotic dances were exempt performances.

The tribunal said the expert's "view of choreographed performance is so broad as to include almost any planned movements done while playing canned music... Further, the terminology [the witness] employs in her report and testimony at times appears designed to neatly fit into the statutory exemption language."

The state's Appellate Division, Third Department, affirmed the tribunal's ruling.

Its rejection of the expert testimony was not arbitrary and the club's remaining evidence failed to prove it is entitled to the exemption for choreographed performances, the court ruled.

"The record reflects that the club's dancers are not required to have any formal dance training and... often rely upon videos or suggestions from other dancers to learn their craft."

In its appeal before the state's high court, Nite Moves argues that the tribunal's was arbitrary and capricious and "relied on legal error."

It says it "stretched and pulled at both the law and the facts to avoid what appears to petitioner to be obvious: that this establishment qualifies as one which features 'choreographed' performances, and thus is excluded from the tax at issue...

"[T]he tribunal set itself up as a dance critic, despite claiming no expertise in the field. It determined that there was no merit to the expert opinion offered by petitioner, despite no attempts before the ALJ to impeach or undermine her."

The club also argues that nude dancing is "protected expression," and not subject to a discriminatory tax.

The state's high court was expected to hear oral arguments in the case Wednesday.

Attorney W. Andrew McCullough was set to argue for Nite Moves, while Assistant Solicitor General Robert M. Goldfarb was to present arguments for the tribunal.

From Legal Newsline: Reach Jessica Karmasek by email at

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