Tax challenge by strip clubs postponed until next month

CARSON CITY -- An appeal by six Las Vegas strip clubs seeking a refund on the state's live entertainment tax was delayed Monday to give both the taxpayers and the attorney general's office more time.

The appeal on behalf of the clubs who argue the tax unfairly targets their businesses was the result of a denial of the refund request by Tax Department officials.

The Tax Commission is scheduled to hear the appeal in August for a refund covering January through April of 2004.

Last year, eight clubs filed a complaint in federal court arguing the tax was unconstitutional and seeking refunds on taxes paid. That complaint was dismissed, but the decision is on appeal.

The ACLU of Nevada is supporting the clubs. Allen Lichtenstein, general counsel for the ACLU of Nevada, said the group views the tax as one that unconstitutionally singles out First Amendment activity.

At the hearing before the Tax Commission, which was meeting both in Las Vegas and the capital, Senior Deputy Attorney General David Pope defended the constitutionality of the levy, first established by the Legislature in 2003.

The tax does not target one type of business but is "content neutral" he said.

It is a "reasonable means to raise revenue," Pope said.

Any decision to refund the tax to the taxpayer should also take into consideration that there is no way for the clubs to pass the tax refund back to patrons, he said.

Brad Shafer, a Michigan lawyer representing the clubs in the appeal, did not present his case to the commission, instead suggesting he needed to provide additional information to the panel.

The hearing was held in public after Shafer waived any right to confidentiality under a new open meeting law passed by the 2007 Legislature.

Shafer is representing Spearmint Rhino Gentlemen's Club, Treasures, Sapphire, Jaguars, Olympic Garden and Crazy Horse Too Gentlemen's Club.

When members of the commission learned of the need to provide more information, they voted to delay the hearing so all the information could be in their hands prior to the next meeting on Aug. 6.

Nevada's tax on live entertainment was passed in 2003 and modified in 2005. It requires the adult clubs to pay up to 10 percent of ticket sales or admissions as a tax.

The specific refunds sought by the clubs were not discussed at the hearing, and Shafer said that information might be considered proprietary by the businesses.

But Thom Sheets, chairman of the panel, noted that the new law regarding disclosure of actions by the panel requires the specific amount to be included in any abstract opinion issued on a taxpayer appeal.

When the federal complaint was filed last year, Pete Eliades, owner of the Olympic Garden and co-owner of the Sapphire club, said the tax added up to about $150,000 a month for both clubs.