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May 23, 2015

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Brothel industry falls short in desire to pay state taxes

Proposal led by Democrats to tax services appears dead this session

Sun Coverage

CARSON CITY — After decades of pleading, Nevada’s legal brothel industry was about to get its wish of paying taxes, giving prostitution the legitimacy that comes with contributing to the state’s bank account.

But new taxes proposed by Democrats appear to be dead, or at least on life support, and so too the chance for the state to tax the willing and able brothel industry.

Nevada is the only state with legal prostitution, but it has a somewhat awkward relationship with its industry.

For one thing, it’s illegal in Washoe and Clark counties, home to Reno and Las Vegas.

Second, lawmakers have been bashful about bringing “that money” into the mix to pay for things such as schools, universities and social services.

The reasons are understandable. Anytime prostitution is brought up, it attracts a media frenzy drowning out the serious work they’re doing. Also, some politicians have said, the brothel money would somehow stain the good, clean dollars used to pay for schools and safety net (from the wholesome casino and construction industries).

As people move in and the political environment shifts, the industry views itself as vulnerable. No less than Senate Majority Leader Harry Reid used his address to the Legislature this year to call for outlawing brothels.

So the industry, at least since the 1990s, has volunteered to pay into the state’s tax coffers. If the brothels pay money to the state, the thinking goes, it’s one more reason that lawmakers won’t ban prostitution.

(The industry pays money to counties, tens of thousands of dollars, in privileged business license fees.)

In 2009, former state Sen. Bob Coffin, now running for Las Vegas City Council, proposed a $5 per transaction tax for legal acts of prostitution. But it died, with legislative leadership not wanting to deal with a potentially controversial distraction in a pressure-cooked Legislature.

“That’s the closest we got,” said George Flint, longtime lobbyist for the brothel industry.

(In 2003, when lawmakers were discussing a live entertainment tax, Flint said the industry agreed to a 10 percent entrance fee, but was rebuffed.)

So fast-forward to 2011. Under two proposed taxes, a “margin tax” and a sales tax on services, the state would get some general fund dollars from the state’s bordellos, other than $200 it gets from them filing for a business license.

Democratic leadership has proposed the margin tax, based on a company’s adjusted gross revenue, but that appears dead or dying, sources conceded.

Flint said only three operations would meet the threshold of $1 million a year in business.

A sales tax on services would be the first tax on “the act of prostitution,” Flint said. Currently, the sales tax is only collected on the sale or use of tangible goods, such as a Big Mac, and not on things such as haircuts.

A Democratic source said the brothel industry would indeed be included in the sales tax on services, which would be 1 percent under the current proposal. Leadership began with a broad definition of what to tax, and then exempted certain services, such as health care or child care, that were deemed essential.

Flint said the industry, despite struggling in the recession, supports being taxed.

(He noted that brothels pay sales tax on food and drinks they serve, as well as other things. “We actually sell a lot of souvenirs,” he said.)

But the real money, Flint said, comes if the Legislature ever decides to legalize and regulate prostitution in Clark County. If 1,000 women got work cards for four “dates” a day and charged $500 a date (almost half of the average rate at a Pahrump brothel, Flint said) it would generate $7.3 billion in annual economic activity.

Figuring a 40/40/20 split among the worker, the owner of the operation, and the government entity, Flint said it could generate $146 million a year.

“I haven’t been showing this around too much,” Flint said of the estimates. “At some point, I figure they’ll realize they have a budget problem and come ask.”

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