(Bloomberg) A New York strip club can’t claim a tax exemption on entrance and performance fees on the grounds that it presents “musical arts performances,” the state’s highest court ruled.

The New York Court of Appeals in Albany upheld Tuesday a lower court’s ruling that Nite Moves, an adult “juice bar” in Latham, N.Y., didn’t prove to tax authorities that its stage and couch dances merited the exemption granted to artistic performances.

“It is not irrational for the tax tribunal to decline to extend a tax exemption to every act that declares itself a ‘dance performance,’” the Court of Appeals said in a 4-3 decision.

While the state imposes a sales tax on any admission charge greater than 10 cents for the use of a “place of amusement,” the Legislature created an exemption for “dramatic or musical arts performances,” according to the ruling.

Nite Moves, which calls itself an “upscale non-alcoholic juice bar,” argued its performances entitled the adult- entertainment business to the exemption, according to the ruling.

The club, which was required to show that its fees were admission charges for choreographed dance routines, failed to prove that performances on either the main stage or in private rooms qualified for the tax break, the Court of Appeals said.

Private Dances
The state’s Tax Appeal Tribunal discredited an expert presented by the club who said the performances were choreographed, finding that her testimony was compromised by her opinion that private dances were the same as those on the main stage although she didn’t observe them or have personal knowledge, according to the ruling.

The tribunal is a panel of three commissioners appointed by the governor that heads the state’s Division of Tax Appeals, created by the legislature in 1986 to resolve tax and licensing disputes, according to its Web site.

Court of Appeals Judge Robert S. Smith disagreed with the majority, saying the tribunal’s ruling “makes a distinction between highbrow dance and lowbrow dance that is not to be found in the governing statute and raises significant constitutional problems.”

Hustler Tax
“Like the majority and the tribunal, I find this particular form of dance unedifying— indeed, I am stuffy enough to find it distasteful,” Smith wrote in his dissent. “Perhaps, for similar reasons I do not read Hustler magazine; I would rather read the New Yorker. I would be appalled, however, if the state were to exact from Hustler a tax that the New Yorker did not have to pay, on the ground that what appears in Hustler is insufficiently ‘cultural and artistic.’”

The majority said qualifying the dances as artistic performances would “allow the exemption to swallow the general tax” since other forms of entertainment not specified by the Legislature would ask to be spared from the levy.

“If ice shows presenting pairs ice dancing performances, with intricately choreographed dance moves precisely arranged to musical compositions, were not viewed by the Legislature as ‘dance’ entitled a tax exemption, surely it was not irrational for the tax tribunal to conclude that a club presenting performances by women gyrating on a pole to music, however artistic or athletic their practiced moves are, was also not a qualifying performance entitled to exempt status,” the majority wrote.

Considering Alternatives
Andrew McCullough, a Utah-based attorney representing Nite Moves, didn’t immediately respond to messages seeking comment on the ruling. McCullough told the Associated Press that he and his clients are disappointed with the ruling and are considering alternatives that include a petition to the U.S. Supreme Court.

The club had appealed an assessment of $124,000 in sales tax plus interest, Cary B. Ziter, a spokesman for the New York State Department of Taxation and Finance, said in a telephone interview.

“We’ve been saying all along that they failed to prove that a tax exemption applied in this situation,” Ziter said in a statement. “We’re pleased with this decision, because it gives similar business clear guidance on the issue of sales tax when it comes to live exotic dance establishments.”

The case is 677 New Loudon Corp. v. New York Tax Appeals Tribunal, 157, New York Court of Appeals (Albany).