Brothels could get taxed in budget crunch

PAHRUMP -- The manager of one of Nevada's ritziest brothels proudly walks the 297 acres that surround The Resort at Sheri's Ranch.

Laraine Harper points to the new expansion that opened last year and glows when talking about the sports bar with a commercial kitchen, the themed bungalows, Jacuzzi rooms, and yes, a snow maker.

"Business is good," Harper says.

So good that several influential lawmakers think the industry should do more than fulfill sexual fantasies as the state faces up to a $704 million budget deficit.

Nevada is one of many states looking for ways to make up serious shortages that run into the billions, and many have plans to raise taxes on such vices as tobacco, alcohol and gambling.

But this could be the ultimate sin tax.

"Everybody should pay," Assemblywoman Sheila Leslie, D-Reno, said. "It should be taxed just like any other entertainment."

Taxing the bordellos, though, could further legitimize an industry that many people in the state would rather ignore, hurt small rural counties that depend on brothel revenue and drive legal prostitutes into the illicit world of private practice.

The thought of the state taxing the brothels hasn't left owners particularly enthused, either.

"What are the girls going to do?" Geoff Arnold, president of the Nevada Brothel Association, asked. "Have a calculator in the room? The girls aren't the best at math."

They may soon have to learn.

Gov. Kenny Guinn has proposed a 7.3 percent tax on entertainment and admissions that's expected to generate $82.5 million in its first year and $85.8 million in its second.

The tax lists movies, professional sporting events, adult cabarets, strip clubs, art galleries and beauty contests, among others. Nowhere are brothels listed in the more than 1,100-page proposal compiled by the Governor's Task Force on Tax Policy.

But the brothel industry also fails to appear on the list of exempted businesses, which includes massage, yoga, recreational rentals and golf.

George Flint, a brothel lobbyist and Reno wedding chapel owner, recently was quoted explaining why the industry should be added to the exempt list.

"I don't look at sex as either an amusement or an admission," he said. "It's a needed social service that I think falls in the same category as therapeutic massage or physical therapy or is in the same class as chiropractors."

Perry Comeaux, the state's director of administration, said the details of the tax proposal will be fleshed out by lawmakers. He said the state could end up taxing the fees prostitutes charge their customers.

"I would think that is how they would approach that," he said.

Brothels don't like talking about their profits -- it's a house secret. There are 28 licensed brothels operating in 10 of Nevada's 17 counties. They generate tens of millions of dollars in profits, Arnold said. The state Health Division estimates 365,000 sex acts -- 1,000 a day -- are performed in Nevada's brothels.

The brothels employ hundreds of women, and paid more than $500,000 to local counties for licenses, room taxes and other fees last year, according to county governments. Counties use the money for a variety of purposes, including financing a $120,000-a-year ambulance service in Nye County.

Storey County Commissioner Greg Hess said a state tax would lessen the ability of the counties to tax brothels.

"If it puts one of them out of them business it would hurt the county," he said. "For some of these rural counties the brothels are a major source of income. It's pretty hard to replace that income."

Prostitutes are contract workers, with most splitting their fees with the brothels. Prices can range from $200 to $50,000 at Sherri's, which is about an hour west of Las Vegas in the dusty town of Pahrump.

Sheri's is valued at $4.5 million, according to Toni North, chief deputy treasurer of Nye County. Harper said the new expansion cost $7 million and the brothel intends to build a $42 million PGA golf course.

It's a far cry from the double-wide trailer that was Sheri's in the old days. The brothel, which bills itself as "world famous," handled more than 10,000 customers last year -- meaning Sheri's would pay a minimum of $146,000 in new state taxes if two-thirds of the Legislature approves.

Destyny, a 15-year veteran of the business and a former prostitute at Sherri's, says no matter how much the women make it's never enough. The women work hard at their jobs, Destyny says she used to have 30 "dates" a day in her younger years.

"If they add another 7 percent that puts us in the 40 percent tax range," said the 42-year-old Destyny now employed at Bella's Mens Club in Wells. "After the house gets our 50 percent, the IRS wants 40 percent. That's not fair. They get enough of our money."

Owners agree.

"If a brothel does everything right, we get about 11 percent profit" said Dennis Hof, who owns the Moonlight Bunny Ranch and Miss Kitty's Pussycat Lounge in Mound House near Carson City. "We have a lot of overhead. It's not a big enough return on the investment to be in business. You'll drive the girls underground. You are penalizing her to work in a legal environment."

Hof said he might make the short trip to the state capital to make his case -- one that might not ever be forgotten.

"I'm taking a 100 hookers and walking on Carson City," he said.

It might take until the end of the legislative session to finally figure out who's going to get taxed and how much they are going to pay.

David Parks, D-Las Vegas, who chairs the Assembly's taxation committee, thinks the brothel tax should be considered, and Leslie has proposed bordellos split the 7.3 percent tax with the women.

If the brothels are forced to pay the new entertainment tax, it could represent a watershed moment for the industry that is now confined to rural Nevada counties.

People once said gambling always would be seen as a seedy stepchild, but that changed after it was legalized in 1931 and the state became dependent on the industry, which supplies about one-third of Nevada's tax revenue.

"When you talk about paying taxes on a state level this would be more official recognition as a legitimate business," state historian Guy Rocha said. "I would argue that brothel prostitution in the last 30 years has changed dramatically. Clearly it's not the old-time brothel. It's a more sophisticated business.

"There are some people who argue that Nevada will soon be the Amsterdam of North America."

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