From the New York Law Journal

Joel Stashenko, New York Law Journal
June 8, 2015
ALBANY - Pole dance routines by exotic dancers in an Albany-area juice bar are an expression of artistic merit, but the private couch dances performed for individual patrons are not, a state tax department administrative law judge has ruled.
The distinction drawn by ALJ Joseph Pinto Jr. is an important one for the outcome of the state Division of Taxation's latest attempt to collect sales taxes from the Nite Moves club on couch dances. Of the $4.9 million in sales reported in a state audit of Nite Moves between 2005 and 2010, just over $3 million came from the private dances performed in small rooms off the main stage of the nightspot. Auditors contend that the club and its proprietors owe the state just under $530,000 in unpaid taxes on the private dances and on cover charges for the period.
The same club challenged its tax bill for 2002-05, also on grounds it was due the exemption for artistic performances on First Amendment grounds. That bid was ultimately denied in 2012 in a 4-3 ruling by the state Court of Appeals in Matter of 677 New Loudon Corporation v. New York State Tax Appeals Tribunal, 19 NY2d 1058 (NYLJ, Oct. 23, 2012).
Pinto rejected the claim of Nite Moves' owners that the couch dances, being artistic in nature, fall under the same state sales tax exemption that state Tax Law §1105(d)(5) provides for admissions to a "theater, opera house, concert hall or other hall or place of assembly for a live, dramatic, choreographed or musical performance."
Nite Moves owners Stephen Dick Jr. and Stuart Cadwell provided sufficient evidence to make their case that the admission fee, $4 before 5 p.m. and $11 after that, is not subject to sales tax because it provides access to the pole dance routines offered on a continual basis by a changing cast of dancers.
Those, Pinto wrote in Matter of 677 New Loudon Corporation, 824333/824334/824335, are sufficiently choreographed, costumed, illuminated and practiced by dancers to represent a dramatic or artistic presentation.
He cited the testimony presented by several dance experts about the artistic merit of the pole routines, but said he found most persuasive the testimony of two Nite Move dancers, identified of "Alize" and "Taylor," "who, without pretense, provided a more visceral description of the business and their art, in contrast with the theoretical opinions of the more erudite experts."
Both performers have backgrounds in formal dance, Pinto noted, and both told him of efforts they made to practice and perfect their pole dances, including studying other dancers in person and on YouTube and the hours they spent practicing their multiple routines.
"Taylor had a repertoire of about 40 songs and planned movements that she used for her stage routines," Pinto wrote. "She invested heavily in her costumes and shoes and they were integrated into her dances. She described in detail at the hearing while her videos were played and told of how she utilized repetition, pole movements and the use of a fictional character of her own creation to interact with the audience."
Pinto held that the just under $1 million in cover charges Nite Moves collected for the 2005-10 period are exempt from sales taxes under the exemption for admissions to artistic or dramatic performances.
The dancers and the experts submitted far less evidence about the private dances, and those do not have the artistic merit to justify the state sales tax exemption, Pinto said. Nite Moves' dancers generally charge $20 for each three-minute lap dance they perform topless and $30 for a nude dance, according to the ruling.
Among the factors that distinguish the private dances from the pole dance is that they were performed in a confined space, they were not choreographed and the music was chosen by the club, not the dancers, Pinto said.
He cited the testimony of the supervisor of the Nite Moves audit who said the "private dance was essentially a full body rub" and far different than the pole dances the supervisor observed in his 10 to 15 visits to the club.
"The overriding preoccupation of both management and dancers was luring patrons to small rooms for the ultimate in physical contact with the performers and having them remain there as long as possible to maximize revenue, not the performance of a choreographed dance or artistic performance," Pinto concluded. "The components necessary for a theater ... are absent from the private dance rooms." Pinto rejected the club's attempt to have the tax statute declared unconstitutional, noting that the Tax Appeals Tribunal or its hearing officers lack the jurisdiction to consider constitutional challenges to tax statutes.
Nite Moves was represented by W. Andrew McCullough of Midvale, Utah.
McCullough said Pinto's determination is "much better" than the outcome of the earlier litigation. "Instead of one expert, we brought in five this time," McCullough said Friday. "Instead of half a day for a hearing, we took two days. We are relatively pleased."
However, McCullough said he has not had a definitive discussion with the club's owners of whether they will want to appeal Pinto's decision to the state Tax Appeals Tribunal.
"There was some discussion of maybe this is the best we are going to get," McCullough said. "But there was also some discussion that we may want to keep doing this. For me, this is a great case: It may never end."
Division of Taxation attorney Osborne Jack argued for the tax department.
Nite Moves' owners failed in their attempt to get the U.S. Supreme Court to hear an appeal of the Court of Appeals' ruling in their previous litigation (NYLJ, Oct. 16, 2013).
The administrative law judge who initially heard Nite Moves' earlier tax challenge case, Catheine Bennett, found that the club's dances qualified for the sales tax exemption, but her determination did not distinguish between the artistic merits of the pole dancing and the private couch dances (NYLJ, March 26, 2009).