Signed 6/7/95








Petitioner, ) FINDINGS OF FACT,






) Account No. XXXXX

Respondent. ) Tax Type: Sales & Use





This matter came before the Utah State Tax Commission for a Formal Hearing on XXXXX. G. Blaine Davis, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was Mr. XXXXX, Attorney at Law, together with Mr. XXXXX, President of Petitioner, and XXXXX. Present and representing Respondent was Mr. XXXXX, Assistant Attorney General, together with XXXXX, from the Attorney General's Office, Mr. XXXXX, Mr. XXXXX, and Mr. XXXXX from the Collections Division of the Utah State Tax Commission.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is Sales and Use Tax.

2. The period in question is the audit period XXXXX through XXXXX.

3. Petitioner is a Utah corporation, with its principle place of business in XXXXX County.

4. Petitioner was incorporated on XXXXX, and has been in good standing in the State of Utah since the date of incorporation. 5. Petitioner's principle business location, since opening in XXXXX, is, and has been, XXXXX, in the XXXXX, State of Utah.

6. Petitioner is licensed under the South Salt Lake City Sexually Oriented Business (SOB) ordinance to provide sexually oriented entertainment on the licensed premises.

7. Petitioner also provides, under separate license with the City of South Salt Lake, business to locations other than the licensed premises.

8. For the business conducted at other locations, the dancers are booked for bachelor parties "private entertainment" off the premises. Dancers are booked in advance for parties off the premises for a specific price and a specific period of time.

9. For the business conducted on the premises, Petitioner runs a public "cabaret" or dance show in which dancers perform for an audience, usually made up of several people. The dancers are usually nude or they are wearing very minimul or scanty clothing.

10. The show is open to the public, but because of its sexually explicit nature, it is limited to persons over the age of 18 years.

11. A patron desiring to see the public dance show pays an admission fee of $$$$$ upon entering the reception area in the front of the building. This admission fee is for admission to the show, and is good for all of the operational hours on the date of admission.

12. The dance show operates continuously, or nearly continuously, from XXXXX until XXXXX Monday through Friday, and for shorter periods of time on Saturday and Sunday.

13. It is undisputed that the XXXXX fee referred to above is an admission charge to the premises for the purposes of entertainment, and is subject to sales tax.

14. Customers may come to the premises to see the public show, or for "private entertainment" or for both. If a customer attends the public show first, the ticket stub is good for a $$$$$ credit on private entertainment.

15. The entertainment provided by Petitioner is three fold, i.e., the public show which is available to everyone, the bachelor party performances which are performed off of the premises of Petitioner, and the "private entertainment" which is performed in separate private rooms on the premises of Petitioner. The parties have agreed that the public shows are subject to Sales and Use Tax because the amounts paid therefore are for an admission to see the show, the amounts paid for private bachelor parties performed off of the premises of Petitioner are not paid for an admission to a particular location, and therefore are not subject to Sales and Use Taxes. The dispute in this proceeding in whether the "private entertainment" which is performed in separate rooms is subject to sales tax.

16. The private entertainment is carried on in separate rooms on the premises of Petitioner. There is also a separate charge for that private entertainment.

17. The private entertainment permits a customer of Petitioner to select one of the dancers and to have that dancer go into the private room and perform for that customer with no one else present. The dancer is frequently nude, and may perform dances, they may pose, they may sit and talk, or the customer may be permitted to touch the dancer on any part of the anatamony except the genitals or the nipples, and the dancer may likewise touch the customer in any part of the anatamony except the genitals. The customer is also allowed to remove all clothing if that is the wish of the customer. It was represented that sexual intercourse, prostitution, and other sexual acts do not occur within the private rooms.

18. The charge for a customer to go into a private room with one of the dancers is $$$$$ for one half hour, $$$$$ for 45 minutes, and $$$$$ for an hour. The customers are allowed a $$$$$ discount from those prices if they have previously attended the dance show.

19. The revenues received from the private entertainment are divided with 40% of the charges being paid as a booking agent fee to Petitioner, 10% of the charges are for the use of the private room, and 50% of the charges are for the escort's (dancer's) pay, and end up being added to their regular hourly wages with payroll taxes being withheld from such amounts.

20. Petitioner has prepared numerous fliers and advertisements to inform members of the public and potential customers about its various forms of entertainment, and to attract potential customers. Copies of many of those advertisements were attached to a Stipulation of Facts which was filed in this case and which was signed by counsel for each of the parties.

21. Those advertisements which related to the private entertainment conducted alone in private rooms were as follows:

a. Exhibit 10 to the stipulated facts advertises for "private entertainment" and further advertises "one on one entertainment with the entertainer of your choice."

b. Exhibit 11 of the stipulated facts advertises for "private entertainment" and further advertises "one on one entertainment" with the entertainer of your choice."

c. Exhibit 12 of the stipulated facts advertises for "private entertainment" and further advertises "one on one entertainment" with the entertainer of your choice." This exhibit modifies the prior exhibits by advertising $$$$$ per half hour plus tax, $$$$$ for 45 minutes plus tax, and $$$$$ per hour plus tax. The prior exhibits did not include the terms "plus tax."

d. Exhibit 13 to the stipulated facts contains the words "private entertainment."

e. Exhibit 14 refers to it as "cabaret entertainment."

f. Exhibit 15 of the stipulated facts is a newspaper advertisement which refers to it as "private entertainment."

g. Exhibit 16 is a copy of an advertisement from the classified ads which is advertising "adult burlesque" and "dance entertainment."

h. Exhibit 17 is another ad from the classified ads which also uses the words "adult burlesque" and "dance entertainment."

i. Exhibit 18 is another advertisement from the classified ads which uses the term "Utah's finest adult burlesque dance entertainment."

j. Exhibit 19 from the stipulated facts in another newspaper advertisement which advertises "nude entertainers" and "private entertainment."

k. Exhibit 20 is another newspaper advertisement which also advertises "nude entertainers on stage" and "private entertainment."

l. Exhibit 21 of the stipulated facts is another newspaper advertisement which also advertises "nude entertainers on stage" and "private entertainment." It also uses the terms "exquisite live adult entertainment."

22. All of the advertisements for the private entertainment in the private rooms include the term "entertainment."

23. The position of Petitioner is that the charges for the services in the private rooms are not for "entertainment, but are personal services agreements similar to personal services of an attorney or CPA."

23. The position of Respondent is that the prices paid to enter the private room with a private entertainer is an admission fee which is subject to Sales and Use Tax pursuant to the provisions of Utah Ann. '59-12-103(1)(F).

24. Respondent also proposed that a 10% negligence penalty be added to the audit assessment. However, there was no testimony or evidence of any negligence on behalf of Petitioner. In fact, the testimony was that Petitioner had made inquiry at the Utah State Tax Commission, and had been informed that the private room sessions were not subject to tax, but that representation was not confirmed by the Commission employees.

25. Petitioner also requested that the interest on the audit assessment be waived, but did not present any evidence from which the Commission finds reasonable cause to waive the interest.


For the period in question '59-12-103(1)(f), Utah Code Ann. provided that there was to be a tax levied on amounts paid or charged for:

"Admission to any place of amusement, entertainment, or recreation, inluding seats and tables reserved or otherwise, and other similar accommodations."


"Admission" means the right or privilege to enter into a place. Admission includes the amount paid for the right to use a reserved seat or any seat in an auditorium, theater, circus, stadium, school house, meeting house, or gymnasium to view any type of entertainment. Admission also includes the right to use a table at a night club, hotel, or roof garden whether such charge is designated as a cover charge, minimum charge, or any such similar charge." (Rule R8-65-19-33S).


If the original admission charge carries the right to remain in a place, or to use a seat or table, or other similar accommodation for a limited time only, and an additional charge is made for an extension of such time, the extra charge is paid as an admission within the meaning of the law. Where a person or organization acquires the sole right to use any place or the right to dispose of all of the admissions to any place for one or more occasions, the amount paid is not subject to the tax on admission. Such a transaction constitutes the rental of the entire place and if the person or organization in turn sells admissions, sales tax applies to amounts paid for such admissions. (Rule R865-19-33).

The phrase "place of amusement, entertainment, or recreation" is broad in meaning but conveys the basic idea of a definite occasion. (Rule R865-19-34S).

The amount paid for admission to such a place is subject to the tax, even though such charge includes the right of the purchaser to participate in some activity within the place. (Rule R865-19-34S).


In this case, the Petitioner starts with an activity which is fully acknowledged to be entertainment and subject to the Sales and Use Tax. If a customer sees a particular dancer or entertainer that creates sufficient interest in the customer, then the customer has the right to select such a dancer or entertainer to go into the private room with such a customer, after the payment of the required fees. The process has started an entertainment process, and is advertised through all of its advertisements and the news media as "private entertainment", or "private dancing", all of which appears to be in the nature of entertainment. The statute, '59-12-103, imposes the Sales and Use Tax upon any "admission to any place of amusement, entertainment, or recreation ....". Further, Rule 33S provides that an admission means the right or privilege to enter into a place to view any type of entertainment. The Commission finds that the primary purpose of the payment of fees is for the customer to have the right or privilege to go into a private room for the purpose of viewing naked dancers or models, or to talk with such individuals in an unclothed situation, and to talk regarding sexually oriented matters, and that as such, it constitutes entertainment. The fee paid is for admission to such entertainment. The Commission further finds that all of Petitioners promotional efforts are made by advertising "private entertainment" or "one on one entertainment." While Petitioner argues that the nude dancers are there for the purposes of performing personal services, they have never identified any such services except the entertainment of the various customers.


Based upon the foregoing the Tax Commission finds that the charges imposed by Petitioner for the purposes of nude dancers going into a private room with its customers are admission charges, which are made for explicit entertainment purposes, and that such charges are therefore subject to the Sales and Use Tax. The assessment of the Auditing Division is therefore sustained, except as to the imposition of a 10% negligence penalty which the Commission does not sustain. Interest is not waived or abated.

This decision does not limit a party's right to a formal hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134


Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 7th day of June, 1995.


W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner