The court split 4-3, with the dissenting judges saying there's no distinction in state law between "highbrow dance and lowbrow dance," so the case raises "significant constitutional problems."
The lawsuit was filed by Nite Moves in suburban Albany, which was arguing fees for admission to the strip club and for private dances are exempt from sales taxes.
The court majority said taxes apply to many entertainment venues, such as amusement parks and sporting events. It ruled the club has failed to prove it qualifies for the exemption for "dramatic or musical arts performances" that was adopted by the Legislature "with the evident purpose of promoting cultural and artistic performances in local communities."
The majority reached similar conclusions about admission fees to watch dances done onstage around a pole, as well as for lap dances or private dances.
W. Anderson McCullough, attorney for the club, said he and his client were bitterly disappointed by the judges' ruling.
"We thought they were listening, and some of them were," he said.
The New York State Department of Taxation and Finance has said all along the exemption didn't qualify in this situation, spokesman Cary Ziter said. "We're pleased with this decision, because it gives similar businesses clear guidance on the issue of sales tax when it comes to live exotic dance establishments."
Nite Moves was originally assessed $124,000 in sales tax due plus interest, Ziter said. The department was unaware of similar cases working their way through the courts, he said.
McCullough said he and his client still need to look at some alternatives, including whether to petition the U.S. Supreme Court and whether they can present better proof to the tax tribunal that the performances should qualify for exemptions.