Philadelphia: Lap Dances Aren’t Amusement
- Sales Tax News
- Jul 18, 2014 | Gail Cole
Update, 8.22.14: The Nutter Administration has decided against an appeal. For now, at any rate, lap dances at gentlemen's clubs remain free from amusement tax in Philadelphia.
City of Philadelphia Mayor Anthony Nutter (D) thinks the city’s 5% Amusement Tax should be imposed on fees charged inside a club for personal entertainment services, such as the lap dances found at strip club. Club owners don’t think they should have to pay a tax on “interior activities” because they “already pay the amusement tax on cover charges.”
Three clubs and the City of Philadelphia Department of Revenue went to court over tax bills totaling more than $1.5 million (with interest and penalties). The three separately submitted Petitions for Appeal were consolidated “because of the identical nature of the legal issues involved….”
Yesterday, Common Pleas Court Judge Ellen Ceisler ruled against Philadelphia and determined that the Amusement Tax does not “encompass charges for personal entertainment activities occurring within the clubs.”
This battle has been underway since 2012 and it may not be over. According to City Solicitor Shelley Smith, the City of Philadelphia may decide to appeal the decision yet again.
Lack of clarity cited
The ruling references the “lack of clarity” of the City of Philadelphia Revenue’s Amusement Tax explanation, which reads,
“This tax is imposed on the admission fee charged for attending any amusement in Philadelphia. Included are concerts, movies, athletic contests, night clubs and convention shows for which admission is charged.”
According to the Court Opinion published by Tax Analysts, sufficient guidance is lacking “as to which amusement transactions, if any, beyond the admission price at the door are subject to the City’s Amusement Tax.”
The ruling notes that the Department of Revenue had conducted “prior and inconsistent audits of these same taxpayers” whereby the Amusement Tax was not assessed on personal entertainment charges. It reads:
“If the Revenue auditors have varying understandings of what is meant to be taxed under this ordinance, taxpayers cannot be expected to know with surety what revenue is subject to Amusement Tax.
Taxpayers generally are held responsible for knowing which taxes they’re required to pay and for remitting them in full, on time. In this case, the court stood behind taxpayers confused by the Philadelphia Amusement Tax. However, it took a lengthy legal battle.