Larry Flynt’s Hustler Strip Club Loses New York $2.1M Tax Battle

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Gerald B. Silverman

Larry Flynt’s Hustler Club lost another legal battle over $2.1 million in sales tax the state says it owes for in-house currency known as “Beaver Bucks.”

The New York Supreme Court Appellate Division, Third Judicial Department, ruled Dec. 7 that receipts from the sale of currency at the club are taxable as an admission charge to a place of amusement. The unanimous panel-decision further said the currency could alternatively fall under the state’s 4 percent sales tax as a charge for a public performance at a for-profit cabaret.

It was the second defeat for the club in less than six weeks. The U.S. Supreme Court denied an appeal in a related case Oct. 30.

Not Dramatic, Musical Performance

At issue was in-house currency sold at the Hustler Club for tipping topless dancers and gaining admission to private rooms for lap dances.

Upholding the lower Tax Appeals Tribunal’s determination, the Appellate Division court rejected the club’s claims that the currency fell under the state tax law’s exclusion for admission to a “dramatic or musical arts performance.”

A 2008 audit by the state Department of Taxation and Finance found that the club owed sales taxes of $4.8 million for a period between June 2006 and November 2008. The state Division of Tax Appeals subsequently reduced the amount owed to $2.1 million.

The case is HDV Manhattan, LLC v. Tax Appeals Tribunal of the State of New York , N.Y. App. Div., 3d Dep’t, No. 523146, 12/7/17 .

To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y. at gsilverman@bloomberglaw.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com

For More Information

Text of the decision is at http://src.bna.com/uRh.

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State