By Mike Dunn
PHILADELPHIA (CBS) — One of the most unusual tax battles in Philadelphia history has come to an end. The Nutter administration has, once and for all, given up its attempt to levy a tax on lap dances at gentlemen’s clubs.
The administration says it has decided not to appeal a July ruling by Common Pleas Court judge Ellen Ceisler, who threw out the lap dance tax.
City officials confirmed the decision not to appeal but had no further comment. In the past, administration officials had contended that the city Revenue Department’s decision to seek back taxes on lap dances was appropriate under the amusement tax.
George Bochetto, attorney for two of the three clubs that had been hit with the tax, is gratified by the mayor’s decision not to appeal, but not surprised, given the swiftness of Ceisler’s ruling.
He says if the administration wants to tax lap dances, it should change rather than contort the law.
“The city on its own, purely the executive branch of the city, is not authorized to levy new forms of tax,” Bochetto says. “City Council simply has not authorized the City of Philadelphia to tax interior activity in places of entertainment with an amusement tax. Not that the City Council could not authorize it. They could. But until they do, the city cannot in its executive function unilaterally seek to impose that kind of a tax.”
An administration source tells KYW Newsradio that now officials are considering pursuing a change in the tax law. The source says officials believe that is, politically and fiscally, a more efficient route than a legal appeal.
The dispute began last year when Club Risqué and Cheerleaders, represented by Bochetto, were surprised by tax bills totaling nearly $900,000 for lap dance revenues. A third club, Delilah’s, was assessed more than $630,000 in back taxes, interest, and penalties for lap dances.
Attorneys argued that lap dances had never before been taxed, and that they are a form of legitimate theatre and thus not subject to the amusement tax.
The Tax Review Board, in October, sided with the clubs, ruling that the amusement tax law is so vague that it can only be reasonably applied to a club’s cover charge, not other backroom activities. That prompted the Nutter administration to appeal to Common Pleas Court. And in July, Judge Ceisler, ruling after a brief hearing, rejected the city’s effort.
Bochetto believes that Ceisler’s ruling — and the ensuing decision not to appeal the ruling — have great benefit for other entertainment venues that could have later been slapped with tax bills the same way.
“The vessel happens to be gentlemen’s clubs,” he says, “but the principle (that the tax code must first be changed) applies to every place of entertainment, whether it be a piano bar, a baseball game, whatever. I wish I could send a bill to every one of those other establishments to help reimburse my clients the enormous expense to fight this case. But I can’t. Perhaps I could encourage them to stop by, pay a visit, have a lunch or so at the clubs.”
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