Posts Tagged ‘StripClubs’

Nite Moves Asks Supreme Court to Rule on Constitutionality of Taxing Pole Dances in New York

Sunday, August 11th, 2013

When I think of “Night Moves” I think of a Bob Seger song. That’s not what this post is about. It seems that the upstate New York adult entertainment facility named Nite Moves isn’t happy with a New York state sales tax on pole dancers. The essential question: Is a tax on just certain kind of music or entertainment legal?

New York’s highest court, the Court of Appeals, held in a 4-3 decision that a sales tax on pole dancing is just fine. The owner of Nite Moves, Stephen Dick, has filed a writ of certiorari with the US Supreme Court asking the Court to overturn the tax. The question of whether pole dancing is a form of art or something that doesn’t promote culture (and so can be taxed) might be argued next Spring in Washington.

Speaking of Night Moves:

No More Tax Credits for Strip Clubs in California

Sunday, July 7th, 2013

The California legislature banned strip clubs from obtaining hiring tax credits. The legislation, which passed the state legislature last week, is expected to be signed into law by Governor Jerry Brown in the next few days. The specific legislation banned “sexually oriented businesses” from claiming California tax credits.

In other California tax news, the state legislature also eliminated the Enterprise Zone program — the program that led to most hiring tax credits in the state. That legislation is also expected to be signed into law in the coming days.

Cash and Carry Doesn’t Work for Strip Club Owner

Sunday, January 27th, 2013

A running theme of this blog is that it doesn’t matter how you are paid; income from cash is just as taxable as checks or credit cards. But it’s so tempting when you receive cash; who will notice if a few dollars go missing from your tax return?

That was apparently the idea of Kirk Roberts of Salina, Kansas. He owned the Wild Wild West Gentlemen’s Club in Salina. From 2006 through 2008 he carried his cash home and deposited it into his personal bank account rather than his business account. Strip, er, gentlemen’s clubs do take in a lot of cash, and the Department of Justice noted that Mr. Roberts understated his income by $537,942. That’s plenty of cash; I assume that either currency transaction reports or suspicious activity reports led to an investigation.

Mr. Roberts pleaded guilty last week to three counts of filing false tax returns; he’ll be sentenced on April 22nd. Given the tax loss of over $153,000, he may also be looking at a stint at ClubFed. Unlike the Wild Wild West, I don’t think there are any house dancers at ClubFed.

Escort Service Operator Charged with Structuring

Monday, October 8th, 2012

Here in Las Vegas, escort services and strip clubs are big business. They’re also (generally) cash businesses. A joint police task force has been looking into the operations. The local police are concerned about prostitution (it is illegal in Clark County, which includes Las Vegas); federal authorities are interested in tax evasion. One local man has found himself charged with structuring.

As I’ve reported before, structuring is deliberately making cash deposits under $10,000 so as to avoid currency transaction reports. It’s a felony.

Emmanouil Varagiannis has been charged with structuring. Mr. Varagiannis is the general manager of the Olympic Garden. He’s alleged to have made 208 cash deposits totaling more than $1.8 million…all under $10,000. The structuring apparently relates to Midnight Inc.; that entity, which does business as Midnight Entertainers, is an escort service.

The news story in the Review-Journal noted that the task force continues to probe allegations of prostitution and kickbacks to cab drivers who direct customers to specific strip clubs. It is worth noting that Mr. Varagiannis has only been charged with one count of structuring and has not been charged with anything else.

I’m Envious

Monday, September 3rd, 2012

Two stories related to one of my favorite topics appeared over the weekend. The first comes out of Michigan, where the state legislature passed a law to ban “tax zappers.” The only zappers I ever heard of were these:

Bug Zappers, Courtesy of Wikipedia

That’s definitely not what Michigan banned. No, these zappers are used to skim cash from registers in cash-basis businesses so that sales could be under-reported. Who were the customers in Michigan? According to this story, Detroit area strip clubs. It appears that sales of the “Journal Sales Remover” may have been better than thought of. I wrote about this product in 2010; it wasn’t a bright idea then and it’s not one today.

Of course, the new Michigan law is overkill. Anyone violating the new law is also violating various sales tax laws, committing tax fraud against both the IRS and Michigan, and likely violating local ordinances, too.

So from Michigan lets head west to Minneapolis. Last Friday night Envy was raided. That’s Envy, the nightclub. Minnesota State Department of Revenue officers raided the club; the DOR alleges that the owners of the club, James and Susan Beamon, may be skimming cash, grossly underreporting withholding taxes, and not paying all their sales tax. This news story notes that per the search warrant the owners of the club reported negligible income for 2009 and haven’t filed 2010 or 2011 returns. And conspicuous consumption may have gotten the owners in trouble:

“Normally, persons with the income levels reported by the Beamons could not afford a high-priced Cadillac,” the search warrant said.

As a reminder, income is taxable whether you make it in cash, checks, or credit cards. That said, the idea that businesses that deal in large amount of cash would be tempted to skim is normal. That’s why cash businesses such as strip clubs and nightclubs are far more likely to be audited than, say, a jewelry store.

[Image from Wikipedia]

Illinois Adopts Strip Club Tax

Sunday, August 19th, 2012

Back in May I posted about Illinois’ proposed strip club tax. We can now remove ‘proposed’ as the tax was signed into law; the tax goes into effect on January 1st.

The tax of $3 per patron will go to support Illinois’ 33 rape crisis centers. I’m not opposed to funding of rape crisis centers (on the contrary, they’re necessary). What I don’t like at all are “sin” taxes — taxing activities that legislators don’t like. All taxes are passed onto consumers — all of them. While the goal of this tax is quite laudable, it will likely cut patronage. As Alan Greenspan said, “Whatever you tax, you get less of.”

Strip Club Tax Proposed in California; Unlikely to Become Law

Tuesday, May 22nd, 2012

There’s now a proposal in California to tax strip clubs. The revenue that would be raised by the tax, proposed at $10 per patron, would go to rape crisis centers in the state. However, because this is a tax it requires a 2/3 vote for passage. Given Republican’s hostility to anything with the word “tax” in it, this measure is very unlikely to become law.

A Poll Tax–No, That’s a Pole Tax in Illinois?

Thursday, February 16th, 2012

Leave it to the Land of Lincoln for an inventive way to raise money. Illiniois State Senator Toi Hutchinson (D-Olympia Fields) is sponsoring a $5 per person pole tax. The tax would impact strip clubs. The strip clubs are not amused. The Chicago Tribune reports:

We wouldn’t want that,” said Tiffany Winkler, manager of the Chicago club Pink Monkey.

The Admiral Theatre is “strongly opposed to the proposed pole tax,” said Sam Cecola, the North Side club’s director of operations.

I remember that Texas implemented a similar pole tax; the Texas Supreme Court ruled it constitutional though the case is still being litigated. Expect a similar battle if Illinois moves toward a pole tax.

Paranomastically, Ecdysiasts Engaging in Deciduous Calisthenics (And Some Basis, too)

Wednesday, November 23rd, 2011

I need to thank Judge Mark Holmes of the Tax Court. Judge Holmes wrote an opinion today that is wonderful and has expanded my vocabulary. It’s also a great case.

Robert Willson bought a bar in Des Moines, Iowa. His bar burned down in 1994, but he persevered and rebuilt. However, Des Moines condemned his bar to expand the city’s airport. The IRS claimed that there was a large capital gain when the city condemned his bar. Mr. Willson disputed that, and the case ended up in Tax Court.

Mr. Willson’s bar catered to hair bands until one of the bands misused a smoke machine and caused the place to burn down. He rebuilt the bar, and rather than my paraphrasing the decision, here’s what Judge Holmes wrote:

He rented out the old house to a tenant who installed minor improvements (e.g., poles) and opened an establishment felicitously–and paronomastically–called the “Landing Strip,” in which young lady ecdysiasts engaged in the deciduous calisthenics of perhaps unwitting First Amendment expression…He also used $169,000 of his $200,000 insurance proceeds to rebuild the bar.

Two things happened around 1999: Des Moines condemned his property and the petitioner visited ClubFed. Mr. Willson did file his 2000 tax return, and the IRS did audit the return. The issue that had to be determined was Mr. Willson’s basis in the bar.

One key issue in the case is the fact that it is a small Tax Court case — an “S case.”

Rule 174(b) allows a taxpayer like Willson to introduce evidence in an S case that would otherwise not be admissible, and it lets us conduct the trial as informally as possible (consistent with orderly procedure) and to admit any evidence we decide has “probative value”–a fancy way of saying any evidence that helps or hurts Willson’s case. This looser rule is important here, because Willson presented his case quite credibly through his own testimony and that of others who worked at the bar or lived nearby during its heyday. Despite the raffish pasts of Willson and some of his witnesses, we found their testimony on his investment in the bar entirely credible.

Basis is always a troubling issue to explain, and this case is messy because of the fire. This case includes both ACRS and MACRS, boot, a fire, and other adjustments. The rest of the case goes into the formula that must be used to determine Mr. Willson’s capital gain. While “there are computations that still need to be made,” it appears that Mr. Willson will likely not owe as much as the IRS claimed.

Case: Willson v. Commissioner, T.C. Summary 2011-132

Denver Madam Pleads Guilty

Monday, July 11th, 2011

Late last year, I reported on Brenda Stewart. Ms. Stewart owned Denver Sugar and Denver Players, a prostitution ring that, per the Denver Post, catered to the high-end of Denver society.

The problem for Ms. Stewart wasn’t the call-girl ring; rather, it was what she did not do with the profits. She forgot that you do need to pay taxes on all income, even income from being a call girl.

This past week Ms. Stewart changed her plea. In a plea bargain, she pleaded guilty to one count of tax evasion; in return, the government dropped 69 other charges (racketeering, money laundering, and witness tampering). She also agreed to make restitution of $45,000 in back taxes and penalties.While Ms. Stewart could receive up to five years at ClubFed, it’s far more likely she’s looking at one year at ClubFed.

Contact
Archives
Business Blogs
Note: All Content is Copyright © 2014, 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, and 2005 by Clayton Financial and Tax.
Subscribe