Aug 19, 2011
commented on A New Tax on Dancing
Seattle U law student here...
I did some case law research into the statute and the web history of the guide for taverns/bars. Here's what I found: the page on the DOR's website changed to include the information on cover charges (the Department's interpretation of a very vaguely-worded statute) sometime between September 24th and October 21st of 2009. The pre-October 2009 page for taverns did not contain anything about collecting Sales tax on cover charges.
Further - the new wording doesn't properly quote either the regulation [
WAC 458-20-183] nor the statute [ RCW 82.04.050 ] about "contests" or "karaoke". Unlike the "opportunity to dance" (from the WAC), both terms are missing from both and are merely the department's view of the law.
I have a suspicion that this example of "karaoke contest" is not an accident. 10 years earlier in 1999, the DOR won a case against a karaoke bar owner for mis-classification of revenues at the Board of Tax Appeals [ 1999 WL 1458594 ]. The case dealt with an unrelated exemption for the lease of personal property (the guy lost) but relied on the same statute and regulation.
1. Bar and tavern owners couldn't have seen DOR's view on this law until after the financial crisis hit (October 2009)
2. There is yet to be a case challenging the DOR's view that a cover charge at a bar or a club is indeed an "Amusement and recreation services" or is "made for providing the opportunity to dance"
If an attorney representing any anonymous bar owners need help with this, you know where to find me!