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News & ArtsWednesday, February 6, 2013
City Bill Would Remove Law That Taxes Dance Floors
Posted by Cienna Madrid on Wed, Feb 6, 2013 at 12:22 PM
During a routine tax audit two years ago, Tractor tavern owner Dan Cowan was hit with a $220,000 bill from the state Department of Revenue (DOR) for having a dance floor where people could dance.
"I’ve never dealt like anything in my life," says Cowan, who managed to argue the crippling amount down to $91,000 on appeal. "At that point, my options were to take the [DOR] to court and have my fees go back up to $250,000, or pay the $91,000. I'm taking it from my retirement."
But a bill introduced in the Senate Ways and Means Committee yesterday would prevent nightclubs and bars with dance floors from being slapped with the 9.5 percent retail sales tax in the future. SB 5613, introduced by state Senator Ed Murry (D-Seattle), would clarify that sales tax should not be applied to "the opportunity to dance provided by an establishment in exchange for a cover charge." It may seem like a modest tweak but it could have far-reaching implications for small music venues, nightclubs, and nonprofits that promote live music in Seattle and across the state.
Cowan's small Ballard bar wasn't the only Seattle venue hit with the obscure "Opportunity to Dance tax," a somewhat confusing sales tax applied to ticket sales for live musical acts, including DJs, at venues that have a dance floor. (Weirdly, the DOR says the tax doesn't apply to live concerts at venues like the Gorge.) As I wrote when the controversy first erupted, at least four other music-related spaces were also charged back-taxes for having dance floors, including the popular Capitol Hill gay dance club, Neighbours.
"All clubs that offer dancing should be collecting sales tax on their cover charges," stresses DOR spokesman Mike Gowrylow. If they're not, their non-compliant. He says that if a club is confused whether or not they should be collecting the tax, "they should write us a letter and ask us."
The bill hasn't yet been scheduled for a hearing in the Senate Ways and Means committee. It also currently only has four sponsors, which doesn't speak to wide support. (The bill is also missing a fiscal note, so it's unclear what the budgetary impacts of exempting venues from the tax would be.) But Meinert says the SMNA has teamed up with the Washington Restaurant Association, the Pacific NW chapter of the Recording Academy, and Washington arts organizations to educate venue owners and nonprofits throughout the state who could be affected.
"I think a lot of clubs don't understand that this effects everyone with a dance floor, not just Seattle venues," says local music promoter and Seattle Music and Nightlife Association member Dave Meinert. "The DOR wants to tax line dancing. I think we'll get the bi-partisan support we need to pass this."
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Shades of the insanity of the old law, since repealed, that barred dancing in restaurants, which was idiotically applied to Yanni's Greek Restaurant on Greenwood, which the WSLCB shut down because the owner did a little Greek dancing for somebody's birthday.
These are the people who run our state, who are unalterably opposed to even the mildest pleasures and even the tamest happinesses.
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You don't even want to go into the ASCAP/BMI surcharge on venues that allow dancing, which for the Tractor is another multi-thousand dollar bill.
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It seems like a stupid distinction in any case. Whether a crowd is dancing or just standing still shouldn't make a difference to the taxes paid.
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But even if your retail business or restaurant plays just recorded music, or doesn't charge admission for live performances, you are very likely subject to such a charge.
My local restaurant/bar with no dance floor or public performances pays around a thousand a year because they play recorded music. A big factor is how many people can fit in your business at any given time.
Here's an interesting article about it from the NY Times that follows a BMI enforcer around.
Sounds better than getting stuck with a $200,000 bill one day
If it's understood that a sales tax has to be charged on the cover (even if the venue has to "eat" the cost or increase costs of drinks to cover it), it's still better than the government suddenly swooping in and charging some dumbshit tax on dance floors.
I should note that I'm generally opposed to sales taxes. I prefer income taxes, and, even if we must have sales taxes, I think they should be included in the price, not charged at the cash register. But if this state is going to be funded exclusively by regressive taxes, then make the system as simple and fair as possible. Charge the tax on goods and services sold, not on the existence of an item within a business (whether it's used by the customers or not).
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If you're simply playing background music from radio, CD, MP3, etc., and are not using a DJ, jukebox, live performance or playing the audio from your TVs overhead, you should consider subscribing to a commercial music service. For less than $500 per year, you would be compliant with all Performance Rights Organizations (ASCAP, BMI, and SESAC) and receive new music every month.
PlayNetwork is a Redmond-based provider of this type of service. www.playnetwork.com
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If you're simply playing background music from radio, CD, MP3, etc., and are not using a DJ, jukebox, live performance or playing the audio from your TVs overhead, you should consider subscribing to a commercial music service. For less than $500 per year, you would be compliant with all Performance Rights Organizations (ASCAP, BMI, and SESAC) and receive new music every month.
PlayNetwork is a Redmond-based provider of this type of service. www.playnetwork.com
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