go-go dancers as employees for employment tax purposes).
A closer analysis of the specific arguments raised by Show World lends support to the conclusion reached by means of the twenty factor analysis.
1. Performer as Tenant
First, a lease executed only after the first day of use is not indicative of a classic lease. This is especially true in the case where the lease term is usually no more than a couple of days. It seems more likely that the lease is merely a scheduling device, used in the same manner as a weekly restaurant work schedule that allows the waiters and waitresses (traditionally treated as employees) to request the nights they wish to work. Second, the variable rent provision is atypical when compared with a standard lease. Although percentage leases are utilized with respect to some real estate transactions, e.g. retail leases, most leases specify a particular base rental price rather than only a variable fee. Landlords customarily try to protect themselves from the risk, inherent in operating a personal business, of little or no profit. In contrast to this customary practice, Show World structures its agreements so as to make itself even more vulnerable to the downside. Indeed it seems as if Show World is shifting the risk of poor business from its booth performers to itself. This assumption of the risk of loss is more often associated with an employer in an employer-employee relationship than a landlord in a landlord-tenant relationship. Similarly, the notion of withholding 40% of revenues as a security deposit is also not typical of the landlord-tenant relationship.
2. Performer as Independent Contractor
Turning now to address Show World's contention that its booth performers are independent contractors, the Court is equally unpersuaded by Show World's claims. As discussed supra in the tenancy context, the retention by Show World of 60% of revenues received for time spent in the booth by the patron, and the Show World-performer risk-of-loss allocation, is more usual with respect to employees than to independent contractors. Furthermore, as to the monies not retained, we conclude that the 40% coin money is akin to wages and the 100% cash money is akin to a tip. On its most basic level, a tip is a payment made by a person who has received a personal service. Roberts v. Commissioner, 176 F.2d 221 (9th Cir. 1949). Like the waiter who is paid a salary and receives tips, it is the Court's understanding that the booth performer is paid a salary of 40% of the coin deposits and receives a tip of the cash for her personal performance. Indeed, Exhibit 6 in Show World's Notice of Motion details one performer's understanding of the personal performance money to constitute a tip.
The analogy between booth performer and waiter can be further extended. As the waiter primarily relies on his tips as his main source of income, so too may the booth performer rely on her tips as her main source of income. As the amount of the waiter's tip depends upon the skill and efficiency of his performance so too does the booth performer's tip depend on her innate attributes and ability to perform the act desired.
In determining whether a worker is an employee or an independent contractor, the power to control the work is of paramount importance. Frankel v. Bally, Inc., 987 F.2d 86 (2d Cir. 1993); Diaz v. U.S., 1990 U.S. Dist. LEXIS 3440, *6-*7, 1990 WL 61960, at *3 (C.D.Cal. 1990); In re Compass Marine Corp., 146 Bankr. 138 (Bankr. E.D.Pa. 1992). Show World exercises substantial control over its booth performers by preventing the performers from leaving the premises during their shifts and preventing the use of alcohol. In order to ensure that its regulations are being followed, Show World periodically monitors the one-on-one booths by audio devices.
Show World maintains that this high degree of control is necessary in order to prevent a violation of prostitution and narcotics laws. For the purpose of employment tax assessment, however, the critical point is not the motivation for the control, but rather the fact that control is exercised.
Once inside the booths, it may seem, upon first glance, as if the fantasy booth performers control the work by negotiating prices and performing in private. However, it must be remembered that Show World's product is adult entertainment. The only way to put forth the product is by the use of the human figure. The presence of the individual is essential for the distribution of the product.
One of the distinguishing characteristics of the services that booth performers provide is that the particular fantasy is narrowly tailored to the individual customer's needs and preferences. In this respect it may be likened to the services provided by a home health care provider who tailors her routine to the needs of the patient. Similarly, it may be likened to the stage dancer at an adult club who structures her routine so as to please the specific audience. Despite the individuality exercised in the performance of these services, for the purposes of employment taxes, both the home health care provider and the stage dancer are employees. TAM 8749001, 2-10-87; Jeffcoat v. Alaska, 732 P.2d 1073 (S. Ct. Alaska 1987). Thus, the independent nature of the booth performer's work is not dispositive of independent contractor classification.
The foregoing analysis leads to the conclusion that the relationship between the taxpayer and the performer is a unique one, deliberately structured with a view towards the avoidance of the appearance of an employer-employee relationship. Such avoidance would be valid and permissible if, in fact, the preponderance of relevant factors showed that the true nature of the respective roles of Show World and its performers was as the taxpayer contends. But as our analysis of the twenty relevant factors has shown, the scales tilt decidedly in favor of an employer-employee relationship. Show World has not sustained its burden of proving that the Commissioner's determination of employee status is erroneous.
No material facts are in dispute and so summary judgment is appropriate. The Court denies plaintiff's motion for summary judgment and grants the Government's motion for summary judgment.
New York, New York
February 28, 1996
Leonard B. Sand