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Back to Section One | Back to Arts & Entertainment
posted Friday, August 26, 2011 - Volume 39 Issue 34
Dance tax could close popular Seattle bars, clubs, and live venues
Section One
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Dance tax could close popular Seattle bars, clubs, and live venues

by Shaun Knittel - SGN Associate Editor

The Washington State Department of Revenue (DOR) says it's not new, but several nightclub owners in Ballard, Capitol Hill, and Fremont say the 1993 law (WAC 458-20-183) that puts a 9.5% sales tax on amusement, recreation, and physical fitness activities - as well as 'charges made for providing the opportunity to dance' - is new to them.

The DOR has come to collect, and is doing it in a big way. According to several Seattle club owners, the state is attempting to collect retroactively for several years - threatening to bankrupt some venues that could owe upwards of $200,000.

To be fair, the tax - commonly referred to as the 'opportunity to dance' tax - is not something that your average bar or club owner would look for. After all, when was the last time you went to Neumos for an exercise class? The confusion surrounding the enforcement of the dance tax sprang up because the code refers to 'physical fitness services,' but does not list music or dancing clubs as a taxable service.

This whole debacle seems to give new meaning to 'read the fine print.'

The DOR is claiming that after last year's discovery that gyms and other private sporting clubs weren't charging a sales tax on membership fees (nightclubs and live music venues are taxed on their door charge), they sent a special notice to all the groups affected by the law - including nightlife businesses.

But local club owners are crying foul, as they say they never received the notices. Seattle Gay News could not find one club owner or manager to go on record as saying they had been told of the new tax enforcement. They all said their businesses were current on taxes.

Sadly, unless the state waives the retroactive tax bills, some business owners say they will be forced to close their doors.

For now, say some owners who are in the hot seat, not everyone has been audited, but those who have are being told to pay up or be closed down. They say the DOR will not stop with just a handful of bars and clubs, and will soon come to collect from others.

One Seattle club owner who asked to remain unnamed said the tax 'would literally close down almost every live music venue in the city.'

What's worse? The only reason no one has paid the tax is because, they say, they simply did not know about it.

'Every club in Seattle that I've spoken with - and there's a huge conversation going around about this in the club scene - no one's ever heard of this tax, no one's paid it,' said the club owner in an appearance on 97.3 KIRO-FM's Ross and Burbank Show. 'I would like to see an audit - maybe the DOR can provide some from clubs in Seattle that have been paying it. Because they claim it's just a few big ones that got caught cheating, is what the implication is, and I think most club owners would be pretty surprised that the head of DOR accused them of basically cheating on their taxes when that's not the case at all.'

The club owners say the nightlife industry is being targeted because they are one of the few types of businesses weathering the recession.

'The DOR has been looking for places to audit to get more revenue, and this industry is one that's being targeted by the DOR because it's going well,' said the club owner on a radio broadcast.

'The general public should be concerned about this because a lot of venues that people really love going to are right now threatened with being closed, and could be closed within a couple of months,' he said.

As business owners, the bar operators SGN spoke with say they are not opposed to paying taxes, and are not necessarily even opposed to this tax being applied in the future, but to ask clubs to pay now - in amounts upwards of $150,000 - will result in the loss of a lot of Seattle's nightspots, and possibly some LGBT venues on Capitol Hill.

Some Seattle clubs are preparing to fight back against the DOR. According to Neighbours Seattle's attorney, the popular Gay dance club will not just fork over the six figures they allegedly owe. Paying it, they say, would not put them out of business, but it is the principle of the matter.

Still, Mike Gowrylow with the DOR admits that the 'opportunity to dance' tax collection is something that has just come up in Seattle, but 'it's not been an issue anywhere else in the state. Most businesses are paying it, but there are a couple of big ones that apparently got caught, essentially, and think it's unfair and didn't know.'

But Pete Hanning, president of the Seattle Nightlife And Music Association, says the state had not been collecting the tax in the past.

'They're doing a 'gotcha' on us, and that's not a way to govern,' he says.

The DOR has scheduled a meeting with club owners on August 30 to talk about the tax.

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