The Taxation of Erotic Performance
In October of 2025, Poland’s Supreme Administrative Court confronted a question that would have seemed absurd to American tax authorities: Can an erotic performance qualify as culture? The answer—delivered in a verdict parsing the boundaries between art and arousal—reveals less about Polish attitudes toward sexuality than about the Byzantine peculiarities of European value-added-tax law, and the existential difficulty of defining culture itself.
The case concerned an entrepreneur who planned to stage what he described as “original artistic spectacles of an erotic character” on a specialized Internet portal. He argued that as an individual creator producing performances distinguished by their artistic nature, he should qualify for the VAT exemption reserved for cultural services under Article 43, Section 1, Point 33(b) of Poland’s VAT Act. The Director of National Tax Information disagreed. Erotic shows, the Director argued, existed primarily to arouse rather than edify—they served no public interest, provided no access to culture or national heritage, and were fundamentally aimed at stimulating the senses rather than the mind.
The Supreme Administrative Court, after years of litigation, sided with the entrepreneur. Culture, the Court declared, encompasses not merely high culture but mass culture and commercial activity as well. If a performance does not present criminalized behavior, does not consist solely of sexual acts presented in a manner violating social norms, and is not intended exclusively to provoke sexual excitement, it cannot be excluded from the category of cultural services. The scope of cultural services eligible for exemption, the Court noted, should be understood more broadly than a literal reading of EU Directive 112 might suggest.
This was a landmark ruling—yet hardly the final word on Poland’s relationship with the taxation of erotic entertainment. The contradictions embedded in Polish tax policy on this subject create a landscape of bureaucratic caprice in which nearly identical performances can receive diametrically opposed treatment depending on how cleverly they are described in a tax-interpretation request.
The Cultural Exception
The Supreme Administrative Court’s decision built on reasoning developed by the Provincial Administrative Court in Gliwice, which in April 2022 had rejected the tax authority’s position. That court emphasized that Article 43 of the VAT Act does not require cultural services to serve the public interest. Artistic activity, even when commercial and profit-oriented, can possess cultural character. The Gliwice court argued that if an erotic performance presents no criminalized behavior and the creator’s intention extends beyond merely provoking sexual excitement, its cultural nature cannot be dismissed out of hand.
The Supreme Court endorsed this reasoning fully, dismissing the tax authority’s appeal. The Court observed that EU legislators granted member states considerable latitude in defining cultural services eligible for exemption. Engaging in artistic activity outside the realm of high culture cannot, by itself, preclude taxpayers from claiming VAT exemption.
But the Court was careful to establish boundaries. Its interpretation, the justices emphasized, does not extend to conduct that is criminalized or to pornography—which certainly does not constitute culture. The line between a cultural service and one lacking such character is extremely thin, the Court noted, and each case must be evaluated individually.
Crucially, the Court relied on the description the applicant provided in his interpretation request, without conducting evidentiary proceedings. The application did not indicate that the spectacles aimed exclusively to provoke sexual desire—a fact that influenced the outcome. In practice, this means that if a creator genuinely produces stage performances of an artistic and cultural character, the VAT exemption applies; if, however, the shows are in reality typical erotic or pornographic displays, no exemption exists.
The Court also relieved taxpayers providing such services from the obligation to use fiscal cash registers, provided payments occur exclusively electronically and are fully documented.
The Webcam Paradox
The Polish tax authorities adopted a starkly different position regarding so-called virtual prostitution—performances conducted via Internet webcams. In pivotal interpretations issued by the Director of the Tax Chamber in Katowice in January 2015, the authority determined that such activity is subject to both personal income tax and VAT.
The applicant in that case stated that she engaged in virtual prostitution, whereby a client specifies the duration of the service and pays compensation, then connects with her via webcam at an appointed time. The client can direct her actions in real time, issuing commands and instructions, with the activities oriented toward satisfying the client’s sexual impulse.
It bears noting that “virtual prostitution” is not a legal category, and erotic displays do not meet the requirements of prostitution’s legal definition. It appears that through the clever device of labeling such performances “virtual prostitution,” the taxpayer sought to compel treatment of her activity as though it were prostitution—which, paradoxically, would have been highly advantageous from a tax perspective.
The tax authority concluded that one cannot automatically deem such activity contrary to the principles of social coexistence, since definitive assessment should be made by a court in a specific case. Consequently, the transaction can constitute a legally effective contract and thus is subject to VAT and income taxation.
The Authority’s Rationale
The tax authority raised several key arguments justifying taxation of virtual erotic services. First, it questioned whether services provided exclusively virtually, without physical contact, satisfy the traditional definition of prostitution—particularly the element of “placing one’s body at another’s disposal.” Second, even if such activities were deemed a form of prostitution, that does not automatically mean they cannot be the subject of a legally effective contract; any conflict with principles of social coexistence is evaluated by courts on an ad hoc basis.
Third, the authority invoked the principle of tax neutrality and avoidance of competitive distortion derived from European Court of Justice jurisprudence. Exclusion from taxation occurs only in specific situations where, due to characteristics of goods or services, competition between the legal and illegal sector is precluded; in the case of online erotic services, such competition may exist.
Webcam Performance as Economic Activity
According to tax authorities, a camgirl conducts economic activity subject to VAT if she is a service provider, performs her activity continuously, and pursues profit. Tax interpretations confirm that services provided by camgirls constitute economic activity within the meaning of the VAT Act.
Interestingly, the tax authority acknowledged that a camgirl may indeed be an artist who, in giving a performance before a webcam, creates a work under copyright law. However, the authority declined to agree that such performances constitute part of broadly understood culture, stating that not every service by a creator must be a cultural service, and that the purpose of an erotic show is fundamentally to provoke sexual arousal rather than provide access to culture and national heritage.
Documentation and Registration
A camgirl may be exempt from the obligation to maintain a fiscal cash register if she provides services to natural persons not conducting economic activity and receives full payment through postal service, bank, or credit union, provided the payment can be linked to the specific service. The tax authority determined that if transactions are recorded in portal and bank account records, and services are documented in detail in the portal account (information on which user paid, when, and for what), conditions for exemption from cash-register registration are satisfied.
The Taxation of Tips
A problematic issue concerns taxation of donations and tips received by camgirls. Tax authorities maintain these are subject to VAT, arguing that accepting monetary donations and tips in connection with services rendered falls within the catalog of activities subject to VAT. The tax base comprises essentially everything constituting payment that the service provider has received or is to receive for the sale from the service recipient or a third party.
If, however, a camgirl receives a donation from one person up to 5,733 złoty (approximately fourteen hundred dollars), such a donation is not subject to inheritance and gift tax. What matters is distinguishing between donations and payment for specific services—if a viewer contributes a specified amount and the camgirl performs a specific action, this is not a donation but payment for a service, which must be added to income and taxed.
Contradictions and Ambiguities
The collected case law and tax interpretations reveal fundamental contradictions in Polish tax authorities’ approach to taxing erotic activity. On one hand, the Supreme Administrative Court recognizes original erotic performances as cultural services exempt from VAT, provided they possess artistic character and are not directed exclusively toward provoking sexual arousal. On the other hand, webcam performances—even if similar in nature—are consistently classified by tax authorities as economic activity subject to full taxation.
This inconsistency creates a situation in which two nearly identical erotic performances transmitted online may be treated entirely differently for tax purposes, depending on how the applicant presents the activity in an interpretation request. If the applicant emphasizes the artistic and cultural character of the spectacle, a VAT exemption may be obtained; if the activity is described as erotic services aimed at satisfying clients’ sexual needs, full taxation applies.
The problem deepens because tax authorities and administrative courts in interpretation proceedings are bound by the factual description provided by the applicant and cannot conduct evidentiary proceedings. In practice, this means that tax classification of a given activity depends largely on how skillfully the taxpayer formulates the interpretation request, rather than on the actual character of services rendered.
The Supreme Administrative Court and Provincial Administrative Courts have repeatedly emphasized that each case should be evaluated individually, considering the purpose and manner of performance. Yet the absence of uniform, objective criteria distinguishing cultural services from entertainment services of an erotic character creates legal uncertainty and the risk that identical activity will be assessed differently by different authorities or at different times.
An additional complication is the lack of detailed classification for online erotic services in Poland’s Classification of Products and Services, which can pose challenges when registering economic activity. Most likely such activity would be classified as “professional activity not elsewhere defined”—which, however, does not relieve one of the obligation to pay taxes.
The American Exception
American tax law, by contrast, offers a model of clarity—if not necessarily of justice. In the United States, which lacks a federal value-added tax, the question arises primarily at the state level, where many jurisdictions exempt “dramatic or musical arts” from sales tax on admission tickets. Strip clubs have occasionally attempted to claim these exemptions, arguing that nude dancing constitutes a form of dance and therefore qualifies as cultural performance.
The definitive test of this argument began in 2005, when New York’s Division of Taxation audited Nite Moves, an adult juice bar in Colonie, just outside Albany. (Matter of 677 New Loudon Corporation, Doing Business as Nite Moves, Petitioner, v State of New York Tax Appeals Tribunal et al.) The club generated revenue from four sources: door admission charges, “couch sales” for private-room performances, beverage sales, and fees paid by dancers to the club. Following its audit, the Division determined that both admission and private-dance fees were subject to sales tax, which the club had neglected to pay, and assessed $124,921.94 in back taxes plus interest.
Nite Moves challenged the assessment, arguing that the dances performed at the club—both on stage and in private rooms—qualified as “dramatic or musical arts performances” under New York Tax Law Section 1105(f)(1), which exempts such performances from sales tax. The club retained as an expert witness a cultural anthropologist who had conducted extensive research in exotic dance. The expert visited the club, reviewed a DVD of Nite Moves performances entered into evidence, and interviewed several dancers. She testified at length about the sequential components, aesthetics, and principles of exotic dance, and in her written report set forth “the choreographic sequence and characteristics” of the stage performances she had observed. “The presentations at Nite Moves,” she concluded, “are unequivocally live dramatic choreographic performances.” She further testified that the private dances involved “similar kinds of movements” and therefore also qualified as choreographed performances.
An Administrative Law Judge agreed with the club, finding that the fees were not taxable. But the Tax Appeals Tribunal reversed, and when the case reached the Appellate Division in 2011, that court upheld the Tribunal’s decision. The problem, the court found, was evidentiary. The expert had never actually observed any private dances at Nite Moves—she based her conclusions about them entirely on observations from other venues. The DVD showed only stage performances. The testimony of one dancer, who stated that private performances “still use[d] dance moves” and described a particular move she often employed, was deemed insufficient to establish that these performances were choreographed. “Given the dearth of evidence on this point,” the court wrote, the Tribunal’s conclusion was “entirely rational.”
But the court went further, discrediting the expert’s testimony about the stage performances as well. The Tribunal had characterized her interpretation of choreography as “stunningly sweeping”—so broad, it noted, “as to include almost any planned movements [performed to] canned music.” The Tribunal also detected in the expert’s testimony an attempt to “tailor her report to neatly fit into the statutory exemption language,” and found that “the certainty with which [the expert] holds to [her] conclusions, even in the absence of direct knowledge or observation of what occurs in the private areas at Nite Moves, undermines her overall testimony.”
The court emphasized additional deficiencies in the club’s case: its dancers required no formal dance training and often learned their craft from videos or suggestions from other dancers. The single dancer who testified did not extensively discuss the nature of the stage performances. The DVD, standing alone, did not demonstrate that the dances qualified as choreographed performances. Under New York law, statutes creating tax exemptions must be construed against the taxpayer, and the taxpayer bears the burden of establishing not merely that its interpretation is plausible but that it is “the only reasonable construction.” Nite Moves had failed to meet this burden.
When the case reached New York’s Court of Appeals—the state’s highest court—in 2012, a four-to-three majority affirmed. The majority held that the legislature’s intent in creating the exemption was to promote “cultural and artistic performances” in the community—understood to mean high culture—and that an adult venue did not satisfy this statutory purpose. Judge Robert Smith wrote a notable dissent. The distinction between highbrow and lowbrow dance, he argued, was subjective and legally indefensible: “The people who paid these admission charges paid to see women dancing. It does not matter whether the dance was artistic or crude, boring or erotic… a dance is a dance.”
The club also raised constitutional arguments, claiming that the taxing scheme discriminated against exotic dance as a form of protected expression under the First Amendment. The courts rejected this claim. The statute was facially neutral and in no way sought to levy a tax upon exotic dance as expression. There was nothing in the record to suggest discriminatory application—the club had been denied the exemption not because of the nature of its business but because of the inadequacy of its proof.
The dissent lost, and with it any hope that American courts would treat commercial erotic performance as cultural activity for tax purposes. The precedent has held. Non-profit organizations focused on erotic art or education can obtain federal tax-exempt status—the Pan Eros Foundation, which runs Seattle’s Erotic Art Festival, and the Tom of Finland Foundation both qualify as 501(c)(3) charitable organizations. But commercial venues face taxation regardless of any artistic merit their performances might possess.
The American system thus achieves through judicial firmness what the Polish system cannot accomplish through administrative interpretation: a clear, if philosophically questionable, distinction between art and entertainment. Whether this represents progress or merely a different form of arbitrariness depends, perhaps, on one’s definition of culture—and on whether one finds Judge Smith’s dissent or the majority’s invocation of legislative intent more persuasive.
The Arbitrary Line
The result in Poland is a tax regime of exquisite arbitrariness, in which the same performance can be art or commerce, culture or mere entertainment, depending less on what occurs onscreen than on the language used to describe it to bureaucrats. It is a system that rewards not artistic merit but semantic dexterity—and one that leaves performers navigating not the boundaries between art and obscenity, but between competing interpretations of European tax law.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
