The Ultimate Sin Tax

The manager of one of Nevada's finest brothels proudly walks the 297 acres that surround The Resort at Sheri's Ranch, pointing to the $7 million expansion that opened last year. She glows when talking about the sports bar, the themed bungalows, the Jacuzzi rooms.

"Business is good," says Laraine Harper.

So good that several influential Nevada lawmakers think the industry should do more than fulfill sexual fantasies. With the state facing a deficit of up to $704 million, some legislators want to tax the fees of Nevada prostitutes in what could be the ultimate sin tax.

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

Brothels and hookers in Nevada - the only state with legal prostitution - are subject to federal income tax on their overall earnings, and have to pay various county taxes and fees. But Nevada has no state income tax.

Some say a state tax on sex acts would further legitimize an industry that many people prefer to keep at arm's length. A state tax could also hurt the small rural counties that depend on revenue from local brothel taxes. And some fear it could drive legal prostitutes underground.

The brothel owners are not particularly enthusiastic, either.

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

They may have to learn.

Gov. Kenny Guinn has proposed a 7.3 percent tax on entertainment and admissions that is expected to generate $82.5 million in its first year. His proposal lists movies, professional sporting events, adult cabarets, strip clubs, art galleries and beauty contests, among others, as subject to the tax.

Brothels are not listed in the blue ribbon commission's 1,100-page report on which Guinn based his proposal - but they also are not listed among the exempted businesses, which include massage, yoga and golf.

Perry Comeaux, state director of administration, said the details will be fleshed out by lawmakers.

There are 28 licensed brothels operating in 10 of Nevada's 17 counties. They generate tens of millions in profits, though precise numbers are guarded as house secrets. The state Health Division estimates 365,000 sex acts are performed in Nevada's brothels annually, or 1,000 a day.

The brothels employ hundreds of women and paid more than $500,000 to counties in license fees, room taxes and other levies last year. The counties use the money for a variety of purposes; in Nye County, it finances a $120,000-a-year ambulance service.

Some counties fear a state tax would pinch off that revenue.

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

Prostitutes are considered independent contractors, with most splitting their fees with the brothels. Depending on what lawmakers decide, the prostitutes themselves could be responsible for paying some or all of the 7.3 percent tax.

At Sheri's, which is about an hour west of Las Vegas in the dusty town of Pahrump, prices can range from $200 to $50,000. The brothel handled more than 10,000 customers last year; business is so good Sheri's intends to build a $42 million PGA golf course.

"If they add another 7 percent, that puts us in the 40 percent tax range," said 42-year-old Destyny, a former prostitute at Sheri's who is now employed at Bella's Men's 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.

"The state's time might be better spent going after the revenues of all the illegal prostitution that takes place in Nevada under the guise of legitimate business," said Dennis Hof, who owns the Moonlight Bunny Ranch and Miss Kitty's Pussycat Lounge near Carson City. "The legal brothels already pay an unequal share of business license fees."

The tax on sex acts could represent a watershed moment for the industry that is now confined to rural Nevada counties.

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

By Adam Goldman