Monday, February 17, 2003
Copyright © Las Vegas Review-Journal

Brothels may bear budget burden

Bordello owners find nothing funny in Guinn's proposed amusement tax

A sign alerts people approaching the Moonlight Bunny Ranch in Mound House, near Carson City. Dennis Hof, who owns the brothel and the nearby Miss Kitty's Pussycat Lounge, says taxing prostitution would "drive the girls underground." ASSOCIATED PRESS FILE PHOTO

PAHRUMP -- The manager of one of Nevada's ritziest brothels proudly walks the 297 acres that surround The Resort at Sheri's Ranch.

Laraine Harper points to the expansion that opened last year and glows when talking about the sports bar with a commercial kitchen, the themed bungalows, Jacuzzi rooms and, yes, a snow maker.

"Business is good," Harper says.

So good that some lawmakers think the industry should do more than fulfill sexual fantasies as the state faces a $704 million budget deficit.

This could be the ultimate sin tax.

"Everybody should pay," Assemblywoman Sheila Leslie, D-Reno, said. "It should be taxed just like any other entertainment."

But some worry that taxing the bordellos could further legitimize an industry that many people in the state would rather ignore. They also worry that rural counties that depend on brothel revenue would be hurt, or that such a tax is simply not practical.

"What are the girls going to do?" asked Geoff Arnold, president of the Nevada Brothel Association. "Have a calculator in the room? The girls aren't the best at math."

They might have to learn.

Gov. Kenny Guinn has proposed a 7.3 percent tax on amusements that is expected to generate $82.5 million in its first year and $85.8 million in its second.

The tax lists movies, professional sporting events, adult cabarets, strip clubs, art galleries and beauty contests, among others. Nowhere are brothels listed in the more than 1,100-page proposal compiled by the Governor's Task Force on Tax Policy.

But the brothel industry also fails to appear on the list of exempted businesses, which includes massage, yoga, recreational rentals and golf.

George Flint, a brothel lobbyist and Reno wedding chapel owner, recently was quoted explaining why the industry should be exempted.

"I don't look at sex as either an amusement or an admission," he said. "It's a needed social service that I think falls in the same category as therapeutic massage or physical therapy or is in the same class as chiropractors."

Perry Comeaux, the state's director of administration, said details of the tax proposal will be worked out by lawmakers. He said the state could end up taxing the fees prostitutes charge their customers.

Brothels, which were legalized in 1971, keep their profits secret. There are 28 licensed brothels operating in 10 of Nevada's 17 counties. They generate tens of millions of dollars in profits, Arnold said.

The state Health Division estimates 365,000 sex acts a year are performed in Nevada's brothels.

The brothels employ hundreds of women, and they paid more than $500,000 to local counties for licenses, room taxes and other fees last year, according to county governments. Counties use the money for a variety of purposes, including financing a $120,000-a-year ambulance service in Nye County.

Storey County Commissioner Greg Hess said a state tax would lessen the ability of the counties to tax brothels.

"If it puts one of them out of business it would hurt the county," he said. "For some of these rural counties the brothels are a major source of income. It's pretty hard to replace that income."

Prostitutes are contract workers, with most splitting their fees with the brothels. Prices can range from $200 to $50,000 at Sheri's in Pahrump.

Sheri's is valued at $4.5 million, according to Toni North, chief deputy treasurer of Nye County. Harper said the new expansion cost $7 million and the brothel intends to build a $42 million PGA golf course.

It's a far cry from the double-wide trailer that was Sheri's in the old days. The brothel, which bills itself as "world famous," handled more than 10,000 customers last year. That means Sheri's would pay a minimum of $146,000 in new state taxes if two-thirds of the Legislature approves.

Destyny, a 15-year veteran of the business and a former prostitute at Sheri's, said no matter how much the women make it's never enough. They work hard at their jobs, she said.

"If they add another 7 percent, that puts us in the 40 percent tax range," said the 42-year-old, who is employed at Bella's Mens Club in Wells. "After the house gets our 50 percent, the IRS wants 40 percent. That's not fair. They get enough of our money."

Owners agree.

"If a brothel does everything right, we get about 11 percent profit" said Dennis Hof, who owns the Moonlight Bunny Ranch and Miss Kitty's Pussycat Lounge in Mound House near Carson City. "We have a lot of overhead. It's not a big enough return on the investment to be in business. You'll drive the girls underground. You are penalizing her to work in a legal environment."

Hof said he might make the short trip to the state capital to make his case, one that might not ever be forgotten.

"I'm taking a hundred hookers and walking on Carson City," he said.

It might take until the end of the legislative session to figure out who is going to get taxed and how much they are going to pay.

David Parks, D-Las Vegas, who chairs the Assembly's Taxation Committee, thinks the brothel tax should be considered. Leslie has proposed that bordellos split the 7.3 percent tax with the women.

If the brothels are forced to pay the new entertainment tax, it could represent a watershed moment for the industry that is now confined to rural Nevada counties.

People once said gambling always would be seen as a seedy stepchild, but that changed after it was legalized in 1931.

"When you talk about paying taxes on a state level, this would be more official recognition as a legitimate business," state Archivist Guy Rocha said. "I would argue that brothel prostitution in the last 30 years has changed dramatically. Clearly it's not the old-time brothel. It's a more sophisticated business."