No matter what types of shows you attend, music and dancing are pretty much paired at the, um, hip. But for the past few years, the combo has posed a challenge for Washington state music venues and clubs.
According to state law, cover charges and tickets for movies, concerts and theatrical performances are not supposed to be subjected to a sales tax. However, a 1960s rule — largely unenforced until recently — circumvents this exemption. The law states that if a venue provides patrons with “the opportunity to dance,” they must collect a sales tax on all tickets and cover charges. During a 2009 auditing process, the state Department of Revenue noticed that many venues were not complying with the old and somewhat ambiguous law. And it’s not like they just started enforcing the law from that point forward… many venues were not even aware they should have been charging tax on their ticket sales and cover fees but were nonetheless slammed with tens of thousands of dollars in back taxes.
If you think charging venues for offering patrons an “opportunity to dance” sounds a bit ridiculous, you’re not the only one. Earlier this month, dozens of dancers took to the steps of Washington’s Capitol building in Olympia to support a repeal effort that is currently being considered by state lawmakers. Clearly, the “opportunity to dance” is not limited to clubs and music venues. Dance on, Washington!
From a music business standpoint, this dance tax is not only silly — it’s damaging. Instead of spending money on improving venues, booking shows, and promoting themselves, many small to mid-size venues, like the Tractor Tavern mentioned in this Seattle Times article, are struggling to pay all of the back taxes that the state says they owe.
According to this KUOW article, auditors even used websites like Yelp to determine whether a venue offered the opportunity to dance — so patrons who believed they were just helping out their local spots by giving them good online reviews were actually, in effect, setting them up for back tax burdens. The article shows that even Dept. of Revenue employees like Mike Gowrylow see the tax as highly subjective:
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.”
Clearly, this policy favors larger venues that focus solely on putting on concerts. It disadvantages smaller clubs and bars, the places where new musical acts cut their teeth. A bar may not be as clear cut purpose-wise or comparable in size to an amphitheater, but both types of venues are important in maintaining a diverse musical community — especially in a state with such a musical reputation. As it stands, many small venue owners are still trying to figure out how to raise the money that they need to pay their back taxes… all while trying to keep their clubs open and booked.
The effects of the dance tax can trickle down as well. If a venue has to devote a large chunk of its income to paying back taxes that they had no idea they were supposed to be collecting, then perhaps they will have to cut back on their booking calendar. Fewer bookings means fewer shows for working musicians, and also increased levels of competition for those slots that are available. Fewer shows means fewer fans visiting the venues. The tax puts smaller venues at a large disadvantage compared to larger venues — that attract more people anyway — because they are subjected to taxes that larger, strictly “concert” venues are able to avoid.
If Washington’s state legislature wants to protect one of the country’s largest local music scenes, then it’s time to “cut footloose” — by cutting the dance tax.