United States

Arizona: Exotic Dancing Subject to Amusement Transaction Privilege Tax

Jul 31, 2017
From KPMG TaxWatch

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Recently, an Arizona trial court addressed whether a taxpayer’s gross income from operating an “erotic” dancing establishment was taxable under the state’s Transaction Privilege Tax (TPT) “amusement” classification. Under Arizona law, the amusement TPT is imposed on the gross proceeds of sales or gross income of certain types of businesses and establishments, including but not limited to, theaters, movies, operas, and shows of any type or nature. The taxpayer argued that its shows were nothing like theatrical performances or operas and that it fell outside the amusement classification. Notably, the taxpayer argued that, unlike an opera or theater performance, its performances were continuous and its patrons could attend for a few minutes or few hours. In other words, the taxpayer appeared to argue that because its performances did not have a set start and end time and patrons did not attend for the duration, it was sufficiently different from an opera or play.

The judge disagreed, observing that “apart from perhaps at the aesthetic level,” the erotic dances occurring at the taxpayer’s establishment were “comparable to theatrical performances or operas.” Many operas, the judge noted, include erotic dances, such as Verdi’s Aida, Borodin’s Prince Igor, and Strauss’s Salome. Furthermore, patrons are free to enter and exit operatic and theatrical performance as they please and often do so when such performances run long. Finally, the judge noted that patrons at both types of performances are expected to behave in the same manner- they are expected to watch the performance without actively participating in the performance itself, other than by applause or similar feedback. The court concluded that the gross receipts of the business, including any income from providing dancers, was included in the tax base. Please stay tuned to TWIST so you are always in step with Arizona TPT developments!


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.