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Dancing at Neighbours, 2005. Photo by Scrunchleface.

Dancing at Neighbours, 2005. Photo by Scrunchleface.


Dance Tax Causes Confusion Among Seattle Venues

Staff Reporter

A Seattle night club may sue Washington state over a tax on dancing.


It's Friday night at Neighbours, a 29–year–old bar on Capitol Hill. Disco lights flash. Dance music booms. It's only 10:30, so it's not full yet, but some people are already dancing. And they didn't have to pay a tax to do it.

And that is why the club owes the state a whopping tax bill.

Manager Steve Tracy says Neighbours learned last year it owed four years of back–taxes on dancing.

Tracy: "After 30 years in business, we're just now being told we're doing it wrong, and we really do everything we can to make sure we do all of our papers and taxes and whatever filings correctly."

He says the amount they owe is in the six figures. They were just one venue hit by a recent spate of dance tax audits on Seattle clubs.

HD Lodge, on Capitol Hill, used to be called the War Room. That club had to pay about $30,000. And a recent audit found the Tractor Tavern in Ballard owes about $200,000.

The venue owners all say the tax is unfair. But it's been on the books for decades.

It works like this: If the state believes that you give your patrons the opportunity to dance, then you pay the tax even when people don't dance. That's according to Mike Gowrylow, with the Washington State Department of Revenue.

Gowrylow: "You could have somebody go into a nightclub, or a bar, or tavern, and they pay cover charges. Unless you followed every person around, you wouldn't know if they actually danced or not, so the only simple way we could have of defining this is if you give them the opportunity to dance, then the tax applies."

And just because you dance at a show, Gowrylow says, that doesn't mean that the venue gave you the opportunity to dance. Gowrylow gives an example: the Gorge at George, an amphitheater in central Washington. The way the state sees it, the Gorge does not give its patrons the opportunity to dance.

Gowrylow: "People would go to the Gorge to watch a show. Yeah, there are some open areas down there and people might start dancing. But you don't primarily go there to dance. You go there to watch a show."

Let's check that out online.

Reporter: "I'm going to type in dancing at the Gorge in Google. I'm looking at the returns, and here I see on, there are several references to dancing. Beth M. talks about dancing on the hillside with great friends at the Gorge when she went to the Jack Johnson concert. Mark B. says you can dance without blocking someone's view. And Angela A. says it was difficult at first to dance, but good when you get your footing."

And it's this same website, Yelp, that got the Tractor Tavern in trouble, says owner Dan Cowan. He says this is what his auditor said to him.

Cowan: "You have the opportunity to dance, and we verified it by 8 or 10 different references on Yelp."

The state won't talk about specific cases, says Gowrylow, but he says auditors search the Internet to find out whether people dance at specific clubs.

Some nightclubs have paid the tax, but others say they didn't know the tax existed.

The Department of Revenue has an online tax guide for taverns. Until recently, it didn't list the dance tax on the sales tax webpage. Instead, you had to click a link called "special topics" to find it.

The dance tax audits have created an uproar. Now state legislators are involved. State Representative Reuven Carlisle represents Ballard. He may address the problem in next year's legislative session.

Carlisle: "One idea might be actually a broad–based admissions tax, which is a low tax but across the board for everybody."

But that wouldn't help clubs who owe back taxes now.

The War Room exhausted its appeals. It paid, reorganized and changed its name to HD Lodge. It now discourages dancing when it charges a cover, says owner Jason Llorin.

Llorin: "You put things where they think it's a dance floor — you just put a stool, or you put a tabletop with stools all around it. That's, you know, that's all you can do."

Neighbours and the Tractor are still appealing their Department of Revenue audits. Neighbours says if they lose, they might sue. For now, Neighbours is not paying the tax — and their dance floor is still open.

For KUOW, I'm Catherine Kovell.

© Copyright 2012, KUOW