In two separate cases, the Tax Appeals Tribunal and an ALJ have held two different adult entertainment businesses responsible for sales taxes on scrip used to pay for dances and tips. In Matter of HDV Manhattan, LLC et al., DTA Nos. 824229, 824231, 824232, 824233 & 824234. (N.Y.S. Tax App. Trib., Feb. 12, 2016 ), the Tribunal held that the scrip was properly treated as a taxable admission charge, even though it could not be used for admission to the club or to the club’s private areas, because it could be used to pay for a dance in the private area. The Tribunal also found that the charges were not excluded from tax as payments for choreographic performances because, it concluded, private dance rooms did not qualify as a “concert hall or other hall or place of assembly” where such performances need to be held to be entitled to the exclusion. Finally, the Tribunal rejected all of the club’s constitutional arguments, finding that taxability was based not on content but rather on the “setting” of the performances.
In Matter of The Executive Club, LLC, DTA No. 825850 (N.Y.S. Div. of Tax App., Jan. 28, 2016), an ALJ similarly upheld the imposition of sales tax on charges for “executive dollars” that could be used to purchase dances and for tipping. While rejecting the Department’s factual argument that the executive dollars could be used to purchase admission to private rooms, the ALJ nonetheless found that the executive dollars were subject to tax, relying on the decision in Matter of Marchello, DTA. No. 821443 (N.Y.S. Tax App. Trib., Apr. 14, 2011). The ALJ found that, although the scrip in Marchello could have been used to purchase admission to a private room – not the case at the Executive Club – it was also useable to purchase a dance in a public area, and therefore the Tribunal had sustained the tax as an “admission charge” even when it was being used to purchase a dance and not to be admitted to the club or any area in the club.