Washington Levies Huge "Opportunity to Dance" Tax on Gay Clubs
Several Seattle nightclubs -- many of them LGBT owned and operated -- have been hit with something locals have labeled the "Dance Tax." Under state law, tickets or cover charges for movies, concerts and plays are exempt from sales tax. But if a business offers customers "the opportunity to dance," tax must be collected.
Hallie Kuperman, owner of the social dance venue Century Ballroom, said she was hit with a $92,000 tax out of nowhere. Kuperman, who is lesbian, maintains she did not know she was supposed to collect a sales tax on the cover charge at her dances.
Kuperman is not alone. Several Seattle nightclubs have also been hit with large bills after audits by the state Department of Revenue (DOR) revealed they weren't paying the tax either. But DOR Spokesman Mike Gowrylow said that Kuperman should have been aware of the tax.
A Thurston County Superior Court judge upheld the tax in 1971. The DOR said they have repeatedly explained it in publications and on its website.
"It's the obligation of a business to learn, understand and comply with the tax laws," Gowrylow told the Seattle Times.
After routine audits in 2009 showed some businesses weren’t complying with the law, DOR audited 44 Seattle-area nightspots that serve alcohol. Of the 13 that had cover charges, eight were correctly collecting tax and five weren’t, Gowrylow said.
"In a nutshell, a few years ago the Department of Revenue identified a tax that had been implemented for aerobic studios and jazzercise and applied it to clubs," said Kuperman. "They quietly added language to the taverns section of their website, but did not send out a communication to the business sector notifying us of the change, as is customary."
The Department then started targeting high profile clubs and assessing penalties far beyond what any are able to pay. In Century Ballroom’s case it was around $250,000. The Tractor Tavern’s assessment was similar.
"While the DOR has reduced the assessments, they still are high enough that our business’ future is unclear. Our final bill from the state amounts to approximately $92,000," said Kuperman on Century Ballroom’s website.
When Century Ballroom’s current bookkeeper started ten years ago, she said she contacted the Department by phone, reviewed with them all the various things Century Ballroom does and was assured they were paying everything appropriately. Kuperman said the Department now refused to stand behind information they provided verbally.
"The ’Opportunity to Dance’ is not in any law," she said. "It is only the DoR’s interpretation of the law in the Department’s rules. It is also impossible to clearly define what dance is, let alone what the opportunity to do so is. The DoR itself has acknowledged this."
Kuperman, with help from what she called "the world dance community," has raised the money to pay the state the $92,000 tax bill.
"Setting aside that this is a sin tax on an activity that is wholesome and promotes community and healthfulness, the impact on businesses statewide, if not addressed, will have a chilling effect on our vibrant nightlife economy," she added.
State Sen. Ed Murray, D-Seattle, and three other senators have introduced a bill, SB 5613, that would exempt dance-related cover charges from the sales tax.
Murray, who is gay and is credited for championing the state’s successful bid to pass marriage equality legislation last year, said there is confusion over when a musical performance is considered a nontaxable concert and when it’s a taxable "opportunity to dance."
Murray, recalling a concert-hall performance in which people danced in the aisles to the music of the Irish band The Chieftains, asked, "Did that become an opportunity to dance, and should we go back and tax them? I just think it’s a really arbitrary way to try to apply a tax."
The bill is anticipated to make it onto the Senate Floor for a full vote.
Washington State Arts Alliance Foundation has asked supporters to help end the "opportunity to dance" tax. On the group’s website, the Arts Alliance posted, "Do you dance? Do you go out to see live music (from indie rock to country)? Do you appreciate dance? Do you want to live in a community that encourages, supports, and protects dance? If you run an organization that features live music, dancing, if you go out to concerts and clubs, if you dance while karaoke is happening, if you take or teach dance, if you are an arts advocate and support a strong, healthy, and vibrant community -- then this matters to you!"
They are asking for people across the state to call attention to the issue and to contact their State Senator urging him or her to support the passage of SB5613.
The Arts Alliance, Seattle Nightlife and Music Association, Musicians Local 76, The Recording Academy, Washington State Restaurant Association, Social Outreach Seattle and many others support the passage of this legislation.
Seattle Holds Dance-In at the State Capitol
On April 1, nearly 100 people protesting a decades-old state tax on dance venues danced the salsa, flamenco and tango (even a conga line!) up and down the steps of the State Capitol. The protest was organized by Kuperman, in support of a repeal of the "opportunity to dance tax."
Kuperman, the most outspoken proponent of the repeal amongst business owners, said enforcement is arbitrary, because the DOR is targeting medium-sized venues or taverns, and not places like sports stadiums that often host concerts where people dance.
"The interesting part is that the only businesses being targeted are ones chosen by the Department of Revenue, yet they don’t have guidelines to who and how they choose the businesses," said Daniel Hanks, director of outreach for Social Outreach Seattle (SOSea), a local social justice nonprofit asking for people to support SB 5613.
"I work in the nightlife and my livelihood is in dancing," said Hanks, who danced amongst protestors on Apr. 1 at the Capitol Building in Olympia. "They are taxing a physical movement. Does this mean that they can tax yawning or going to the bathroom next? I just want to make sure that this issue will receive as much visibility as possible because it affects just about everyone."
But supporters of repeal are facing the fact that this bill may never come to pass as the state is looking for much-needed revenue due to a shortfall in the state budget.
According to state estimates, repealing the tax would cost the state more than $880,000 in the 2013-2015 budget cycle. Because the measure affects the budget, it remains alive until the waning days of the legislative session.
"If we win, we’ll win it toward the end," said Senate Minority Leader Ed Murray, who was present at the protest (even he danced with the crowd).
Murray has spoken out against the tax in recent weeks, saying, "The whole concept of taxing dance, I think, is a bit odd. Our nightlife business, which is a vibrant part of our business community, gets unfairly hit by this tax."
Read a copy of the law at http://apps.leg.wa.gov/wac/default.aspx?cite=458-20-183. The proposed tax repeal, which has support from both parties, can be read here: http://apps.leg.wa.gov/documents/billdocs/2013-14/Pdf/Bills/Senate%20Bills/5613.pdf to read SB 5613.