Clubs across Chicago have suddenly found themselves in deep water as the Cook County Department of Revenue demands years worth of funds from unpaid amusement taxes.
According to an article from the Chicago Reader, the county code dictates that 3 percent of all ticket sales from venues with a capacity of 750 or fewer, unless the tickets are sold for “live theatrical, live musical, or other live cultural performances,” should be paid in taxes. Small-capacity club Beauty Bar has been asked to pay more than $200,000 in taxes going back at least six years, and President of Hospitality Business Association of Chicago Pat Doerr told the Chicago Reader he represents a half-dozen more clubs asked to pay similar prices.
Most of the businesses the county has so far demanded back-taxes from are venues that primarily book DJ and electronic acts. Beauty Bar owners and Doerr tell the Chicago Reader they thought these establishments were exempt from the amusement tax when the city of Chicago deemed DJ performances to be “live cultural performance” in 2006, but the county says that rule does not apply at its level.
A statement from Cook County Spokesman Frank Shuftan to Billboard Dance reads as follows:
The Cook County Department of Revenue is responsible for collecting the County’s home rule taxes. Among those are an amusement tax which imposes a tax upon the patrons of every amusement which takes place within the County that fails to meet certain exception criteria contained in the County’s ordinance.
The tax in question contains an exemption for live cultural, live musical or live theatrical performances taking place in a venue with a maximum capacity under 750 people. Venues that fail to meet these criteria or the definitions within the ordinance are subject to collecting the amusement tax from its patrons. Pursuant to the evidence currently in our possession, the County believes there is an outstanding tax liability. The Department of Revenue works with venues to address various questions and resolve outstanding tax liabilities. In the event, the Department of Revenue is unable to resolve outstanding tax liability issues, those matters are then referred to the County’s Department of Administrative Hearings and after a hearing is conducted, the hearing officer will deliver a decision.
We look forward to resolving this case in a fair and expeditious manner.
Beauty Bar responded to Billboard Dance as follows:
In May, 2015, our under 750 capacity venue Beauty Bar Chicago that provides some of the best live DJ experiences to our patrons on a weekly basis, received a fine from the Cook County Department of Revenue for $198,104.30 for Amusement Taxes owned since 2008. We were surprised, to say the least, as we have operated under the commonly understood interpretation of the Amusement Tax ordinance, for both the County and the City, that venues under 750 capacity were exempt from this tax as long as they were collecting cover for “live musical or other live cultural performances”. In 2006 the City of Chicago issued a Safe Harbor Ruling concluding that DJs were considered to be a live musical and cultural performance so long as they manipulated the music, and in general created a live experience. Thus, as Beauty Bar only collects cover for nights during which we showcase professional DJs that meet all the criteria set forth by the City of Chicago, we’ve been comfortable operating under the assumption that we’ve been exempt from this tax. Not once had we been questioned by the County about this tax until receiving the bill.
After we received the May 2015 citation, we merely thought the County was looking for us to articulate our position, which we did via phone and email. We then received a letter asking for us to provide contracts for our DJs, and a signed statement explaining reasons why our venue was exempt. We easily complied. Last Fall and Winter they requested more information such as examples of our advertising/posters showing that our DJ’s were prominently displayed, and amounts paid to DJs during 2015 per month. On February 23, 2016 we received a summons to court, after which we engaged an attorney to defend us. We became aware that the County was targeting other DJ driven small venues, and thus we engaged with the Hospitality Association of Chicago to coordinate efforts. During the proceedings this summer, we became alarmed to learn that the County officer Anita Richardson hearing the case made comments such as “Rock, Rap, and Grunge are not fine art, no matter how popular they may be…”, causing us concern that the County may be positioning to not only collect taxes on our DJ driven venues, but also on our small venues that showcase live bands such as The Empty Bottle that for 25 years now has been a staple in Chicago’s cultural fabric.
The great thing about Chicago is that it is ripe with small venues such as ours, and so it’s a shame that the County would attack the very venues that give life to the City’s culture, instead of working on ways to support and cultivate such enterprise. As it is, we pay an exorbitant amount of tax, in one of the nation’s highest taxed cities. We hope that eventually common sense will prevail, and that the County will come to realize they are attacking some of Chicago’s most important cultural contributions to the world. Chicago invented the idea of a DJ being an artist, and spawned House music, one of the world’s most popular musical genres. Last year the City of Chicago Department of Cultural Affairs presented a summer long showcase on House Music’s 30 year history. Some of the world’s best known rappers come from Chicago. If these proceedings continue on, and Beauty Bar is forced to continue expending legal bills to defend itself and the idea that rap, house, rock, and country are indeed ‘art’, it will become impossible for us to continue operating. This amount of tax, both the back-tax they are seeking and having to pay this tax on an ongoing basis, would simply put us out of business. Again, we hope this will not be the case, and that the County officials will not take the preposterous position that a government body ought to determine what is and what is not considered to be ‘art.’
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