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Back to Section One | Back to Arts & Entertainment
posted Friday, September 2, 2011 - Volume 39 Issue 35
Neighbours fighting dance tax while other clubs stay silent
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Neighbours fighting dance tax while other clubs stay silent

by Shaun Knittel - SGN Associate Editor

Last week, Seattle Gay News reported on the ongoing attempts by the Washington State Department of Revenue to collect from several Seattle-area nightclubs, live venues, and bars that offer their patrons an 'opportunity to dance.' Trying to get anyone to go on record was like pulling teeth, as the owners and management of several popular venues feared retribution from the DOR. Owners feared that if they talked, the DOR would apply more pressure - and that pressure, according to more than one of the off-the-record bar owners, could put them out of business. In some cases, the owners owed upwards of six figures.

Meanwhile, the DOR has continuously maintained that the 50-year-old tax law (amended in the 1990s to include physical fitness facilities) is nothing new and that they've been collecting the tax from dance clubs since the 1970s. In short, if you offer the opportunity to dance - or even promote the opportunity to dance (in some cases) - you must pay the piper.

The DOR maintains the club owners and managers knew about the tax, and the club owners say they did not. The situation pits the DOR's word against the clubs' word. It's a mess, and stuck in the middle is - you guessed it - you, the consumer, who might have to begin paying higher door charges (the actual piece of the pie being taxed) in order for the clubs to afford the 9.5% tax.

Out of this battle over dancing and taxation, Neighbours Seattle has stepped forward to fight.

The popular nightclub's lawyer says they are threatening to sue. Mark Kimball of MDK Law Associates says Neighbours is prepared to fight the DOR's money grab by filing a lawsuit in King County or Thurston County within the next six months.

Neighbours' lawyers say that taxing the opportunity to dance in nightclubs, some live venues, and bars is wrong, and that taking the position that a live band is somehow different than a DJ is wrong. In fact, they've gone as far as calling it 'unconstitutional.'

What Kimball is referring to is the fact that, according to DOR officials, not every event that features dancing must pay.

Here is where the logic becomes a bit murky: The DOR says that they do not apply the tax to live venues such as Key Arena, the Gorge, and the Moore because the primary purpose of paying for a ticket is to watch a concert, not dance. The club owners - and Neighbours' lawyers 0 are arguing that people do, indeed, dance at concerts.

Kimball also pointed out that the state had audited the business at least twice since it opened in 1983 and never mentioned the tax. It wasn't until last year, when the state audited Neighbours for a third time, that the state said they had to pay the tax. Kimball said it is not fair for the DOR to go back and say that they are now going to treat the clubs differently than they have for the past 20 years. Kimball said the legislature can make that distinction, but has yet to do so.

Neighbours will enter its 29th year as a popular Gay club on September 5. It wasn't until 2010 that they were told to pay the tax.

According to Mike Gowrylow, a spokesperson for the DOR, state auditors have checked 13 Seattle venues for the dance tax over the past 20 months. He said that eight of the 13 venues were paying the tax, while five clubs were in noncompliance.

Several representatives - including some lawyers - were present at an August 30 meeting with the DOR. At the meeting, according to a club manager who spoke on the condition of anonymity, DOR representatives heard arguments from several of the taxed venues as to what direction they wanted to go. Some venues are asking for the retroactive tax to be dropped and say they will pay it going forward, while others - such as Neighbours Seattle - say they don't believe they should have to pay the tax at all.

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