The Taxation of Erotic Performance
In October of 2025, Poland’s Supreme Administrative Court confronted a question as old as art itself: Can an erotic performance qualify as culture? The verdict—parsing the boundaries between art and arousal—reveals less about sexuality than about the Byzantine peculiarities of European value-added-tax law, and the stubborn impossibility of drawing bright lines around culture.
When the Tax Man Watches the Show
Polish tax authorities and courts have produced a body of case law on the taxation of erotic entertainment that defies easy summary. The interpretations and rulings span three main areas: erotic performances and their classification as VAT-exempt cultural services, taxation of income from webcam performances when characterized as “virtual prostitution” (see article The Naked Taxpayer: When the Tax Man Comes to OnlyFans), and the tax status of traditional prostitution. The most striking conclusion to emerge from this jurisprudence is its profound inconsistency—depending on how services are characterized, tax authorities adopt radically different approaches, creating legal uncertainty that forces performers to choose their words as carefully as their choreography.
Art or Commerce? The Supreme Court Weighs In
The most significant ruling came on October 16, 2025, when Poland’s Supreme Administrative Court confirmed that original artistic spectacles of an erotic character could qualify for the VAT exemption reserved for cultural services under Article 43, Section 1, Point 33(b) of the VAT Act. The Court declared that culture encompasses not merely high culture but mass culture and commercial activity as well.
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 cultural-services exemption. The Director of National Tax Information disagreed. Erotic shows, the Director argued, do not serve the purpose of providing access to culture or national heritage—they are purely entertainment, aimed at stimulating the senses, and can hardly be said to serve the public interest. The fundamental purpose of an erotic show, the Director emphasized, is to provoke sexual arousal, not to provide access to culture.
The Provincial Administrative Court in Gliwice, in an April 2022 ruling, rejected the tax authority’s position. Article 43 of the VAT Act, the court found, does not require cultural services to serve the public interest. The court emphasized a broad understanding of “cultural services,” under which artistic activity—even when commercial and profit-oriented—can possess cultural character.
If an erotic performance does not present criminalized behavior, does not consist solely of sexual acts presented in a manner violating social norms, and the creator’s intention extends beyond merely provoking sexual excitement, the court reasoned, its cultural nature cannot be dismissed. The scope of cultural services eligible for exemption, the Gliwice court noted, should be understood more broadly than a literal reading of EU Directive 112 might suggest.
The Supreme Administrative Court fully endorsed this reasoning, dismissing the tax authority’s cassation 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.
Where the Court Drew the Line
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 ruling was not unprecedented—a similar case decided by the Provincial Administrative Court in Kraków suggested the emergence of a jurisprudential line recognizing the possibility of classifying erotic performances as cultural services.
The Webcam Paradox
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.
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.
Different Standards for Similar Activities
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 that original erotic performances can constitute cultural services exempt from VAT, provided they possess artistic character and are not directed exclusively toward provoking sexual arousal. On the other hand, erotic 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 receive diametrically opposed individual interpretations from tax authorities, depending on how the applicant formulates the description of their activity. If the entrepreneur emphasizes the artistic and cultural dimension of the activity, characterizing it as a “spectacle,” they may obtain confirmation of VAT exemption; if they present their performances as erotic services aimed at satisfying viewers’ sexual needs, they will be subject to full taxation.
An individual tax interpretation provides legal protection only when the taxpayer’s actual activity corresponds to the factual description presented in the application. The problem, however, is that the boundary between “artistic” and “erotic” activity does not exist in the performance itself but in the mind of the observer. The same bodily movement, the same sequence of gestures can be perceived as artistic expression or as erotic stimulation—depending on the context in which the viewer situates what they see and the intention they attribute to the performer.
Consequently, tax classification depends not on objective characteristics of the activity performed but on the narrative in which it is wrapped. A legal system that should classify reality instead classifies its descriptions—not what the performer does before the camera but what they call their activity in the interpretation request.
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 the individual interpretation 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.
A Pirouette Through Tax Court: How New York Distinguished Ballet from Striptease
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 entertainment venue in Colonie, a suburb of Albany (Matter of 677 New Loudon Corp. v. State of N.Y. Tax Appeals Trib.). The club generated revenue from four sources: door admission charges, sales of private performances in separate rooms, beverage sales, and fees paid by dancers to the club. Following the audit, the Division determined that both admission charges and private dance fees were subject to sales tax, which the club had failed to remit, and assessed back taxes of $124,921.94 plus interest.
Nite Moves challenged the assessment, arguing that the dances performed at the club—both onstage and in private rooms—qualified as “dramatic or musical arts performances” under Section 1105(f)(1) of New York tax law, which exempts such performances from sales tax. The club retained as expert witness a cultural anthropologist who had conducted extensive research on erotic 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 erotic dance, and in her written report presented “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 choreographic performances.
An Administrative Law Judge agreed with the club, finding that the fees were not taxable. The Tax Appeals Tribunal reversed, however, 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. Testimony from 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 choreographic.
The court went further, however, discrediting the expert’s testimony about the stage performances as well. The Tribunal 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 discuss the nature of the stage performances in any detail. The DVD alone did not establish that the dances qualified as choreographic performances.
New York courts have long applied the principle that tax exemptions must be construed strictly and narrowly, with doubts resolved against the taxpayer. As the Court of Appeals has repeatedly held, tax exemptions represent an “act of legislative grace” that relieves one class of persons or property from bearing the costs of government, shifting the burden to other taxpayers. Consequently, in exemption cases, the burden of proving entitlement rests entirely on the taxpayer. This is a critical distinction from other areas of tax law, where the tax authority must establish the basis for taxation.
Nite Moves failed to meet this burden.
When the case reached the New York Court of Appeals—the state’s highest court—in 2012, a five-to-three majority affirmed the lower court’s ruling (2012 NY Slip Op 07046 [19 NY3d 1058]). The majority held that the legislature’s intent in creating the exemption was to promote “cultural and artistic performances” in local communities, and that an adult entertainment venue did not satisfy this statutory purpose. Judge Robert Smith, in dissent, criticized this distinction as an arbitrary separation of “highbrow” from “lowbrow” dance with no basis in the statute.
Semantic Traps
The system that emerged from this line of jurisprudence creates a minefield of legal traps in which the boundary between art and entertainment, culture and commerce, ultimately depends on the taxpayer’s rhetorical skill. Paradoxically, attempts to manipulate this system most vividly reveal its internal contradictions.
The case of “virtual prostitution” provides an instructive example. By characterizing her webcam activity as prostitution, the applicant executed a clever semantic maneuver—if tax authorities had recognized this activity as actual prostitution, she would have gained unexpected tax benefits. Prostitution, as an activity potentially contrary to principles of social coexistence, might be deemed not subject to taxation. By calling her performances “virtual prostitution,” the taxpayer attempted to compel favorable treatment through deliberate use of a stigmatizing term.
The tax authorities did not fall for this trap. They noted that “virtual prostitution” is not a legal category, and webcam performances do not meet the requirements of prostitution’s definition—they lack the fundamental element of “placing one’s body at another’s disposal.” Moreover, even if such activities were deemed a form of prostitution, that would not automatically exclude them from taxation—courts make definitive assessments of conflict with principles of social coexistence in specific cases. As a result, the camgirl who attempted to present her activity as prostitution was fully taxed as an entrepreneur providing erotic services.
On the other hand, an entrepreneur characterizing their activity as “original artistic spectacles of an erotic character” can obtain VAT exemption, provided they properly formulate the interpretation request. What matters is emphasizing the artistic character of the presentations, the cultural dimension of the activity, and distancing oneself from the exclusively commercial purpose of sexual arousal.
A fundamental question arises, however, about the value of such an interpretation in practice. During a tax audit, authorities will not be bound by the factual description presented in the application—they will be able to independently determine whether actual performances correspond to the declared artistic character. If the audit reveals that “original spectacles of an erotic character” are in fact typical erotic shows aimed at sexual arousal, the interpretation will lose its protective force. The taxpayer will then face a dilemma: were their performances genuinely art, or were they merely labeled as such for tax purposes? And who—the audit authority, the administrative court, or perhaps an expert in aesthetics—has the competence to decide?
The result is a tax regime of exquisite arbitrariness, in which identical performances can be art or commerce, culture or mere entertainment, depending less on what occurs onscreen than on the language used to describe it in an interpretation request. It is a system that rewards not artistic merit but semantic dexterity—and one in which performers navigate not the boundaries between art and obscenity, but between competing narratives of the same reality. This is taxation not of what one does, but of what one calls it.
A fundamental question arises, however, about the practical value of such an interpretation. During a tax audit, authorities will not be bound by the factual description presented in the application—they will independently determine whether actual performances correspond to the declared artistic character. If the audit reveals that “original spectacles of an erotic character” are in fact typical erotic shows aimed at sexual arousal, the interpretation loses its protective force. The taxpayer then faces a dilemma: were the performances genuinely art, or merely labeled as such for tax purposes? And who—the audit authority, the administrative court, perhaps an expert in aesthetics—possesses the competence to decide?
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.
