Takings and customers have slumped at the state's licensed brothels, the only businesses in America lobbying to pay more tax, writes Andrew Clark

Nobody in the business world has emerged unscathed from the financial carnage wreaked by the global recession. That includes those who ply their trade entirely legally - in the world's oldest profession.

Nevada is famous for its licensed brothels, which originally catered for miners and cowboys working in the sun-scorched desert. Now a lure for lascivious tourists, they have suffered a plunge in earnings as men become parsimonious about their spending on sex.

In good years, Nevada's 25 or so bordellos pulled in as much as $50m (£30m) in revenue. But George Flint, director of the Nevada Brothel Owners' Association, says takings at the state's worst-hit establishments have slumped by 60% to 70%, and even the most robust have suffered to the tune of at least 20%.

"It's been a negative effect," he says. "More so than anything that's had an impact on the industry in the half century that I've been around."

The downturn, says Flint, has drawn more women into both legal and illegal prostitution, but customers are scarce and prices, typically $75 to $250 for a quick "date", are under pressure: "More women are reaching out to work in the industry. The biggest visible effect is that a lot of women are working for about half what they were a few years ago."

Nevada has tolerated brothels since the 19th century and the Silver State is alone in the US in permitting the licensing and regulation of "ranches" where women offer sex for money. With names such as Chicken Ranch, Moonlight Bunny and Cherry Patch, the bordellos are a subject of bitter contention. Critics argue that they legitimise exploitation and abuse, providing dubious working conditions and spawning a vast knock-on industry of illegal street prostitution.

The recession has come at a tricky time. Bordellos were already facing competition from a whole new digital avenue as free listings websites such as Craigslist made sex available at the touch of a mouse.

Brothels are not permitted in the county around Las Vegas, which is by far Nevada's biggest city, but an hour's drive into the desert is sufficient to cross the county line. At establishments within 90 minutes' drive of so-called Sin City, as many as 70% of customers are tourists, of whom about a quarter tend to be foreign. But Vegas is suffering - visitor numbers have fallen as penny-pinching gamblers stay away.

Given the long drive involved in reaching brothels, high petrol prices have hardly helped. One establishment, the Shady Lady Ranch, has been offering $50 fuel vouchers to anybody spending more than $300.

Sheri's Ranch sits beneath a spectacular view of the snow-topped peak of Mount Charleston, in the cotton farming town of Pahrump, near the California border. On a 20-acre site, Sheri's boasts tennis courts, a hotel and spa, a sports bar and a rose garden. It is owned by Resort Entertainment, which also operates two lapdancing clubs in Las Vegas. Its chief operating officer, Jonathan Klempa, readily admits that the downturn is hurting.

He says men who arrive at Sheri's are still willing to pay the same, but footfall is slower: "Our customer quality is about the same, there are just fewer of them."

Staff at Sheri's repeatedly emphasise that the place is like any business. Gloria Mandarino, the ranch's back-of-house manager, used to work at the internet advertising firm Razorfish. She says: "You soon learn this is a company like any other. It's got accounts payable, receivables, the whole lot."

Along a corridor behind the dimly lit bar are rooms where women "entertain" clients. One is set out for a formal meal, with shrimp alfredo on the menu. Another contains a whirlpool bath and a large bin of beer cans, while a third contains sadomasochistic equipment, including chains on the wall and a cage. Big spenders can rent a cottage adorned in elaborate Arabian Nights-style décor for a full night's stay with a prostitute costing a minimum of $3,000.

Mandarino says some clients say they are lonely after a divorce, but adds: "You never know if what you're hearing is a true story. It's like a fantasy land."

Women who work in Nevada brothels are regarded as independent contractors who typically stay for a few weeks or months at a time. But while in situ they are not allowed to leave the premises and have to be ready to parade in a "line-up" within three minutes if a client arrives. At Sheri's, the property is adorned with red lights and a Tannoy system to call women to attend. If they are late, they can be fined.

The downturn afflicting Nevada's legal bordellos leaves one tenacious critic of prostitution with mixed feelings. Melissa Farley, a long-time activist who has studied Nevada's brothels in detail, says that women who end up working in such establishments are already victims of economic woe.

"I'm glad to see the pimps in trouble, But I'm not happy to see any shred of additional economic stress on women who work in prostitution," she says.

Farley's research found that many of the women working in Nevada brothels had experienced homelessness or been abused as children. She points out that Nevada has one of the highest rates of sexual violence in the US, with 42 rapes per 100,000 of population in 2007 compared with a US-wide average of 30, and suggests that the tide of public opinion is turning.

"The economic struggles of legal pimps have to do with the recession, but I also think this has to do with increased awareness of links between prostitution and trafficking," she says. "The glow is coming off Las Vegas as a kind of sexual Disneyland."

In an effort to shore up their legitimacy, Nevada's bordellos are virtually unique in the US business world in lobbying for greater taxation, believing they would be harder to outlaw if they made a useful contribution to the public purse. The industry enthusiastically supported a proposal in Nevada's legislature for a $5 levy on each sexual transaction to help fill up a $3bn budgetary deficit.

Narrowly rejected in a senate committee, the levy would have been the first value-added tax on sex - brothels presently only pay an annual licensing fee and payroll tax.

Bob Coffin, the Democratic senator in Nevada's legislature who proposed the measure, maintains that abolition would be pointless: "You might as well ban the south wind as pretend that at the stroke of a pen you could ban prostitution."

For some Nevada residents, brothels are simply a part of wild west life in a state still dominated by vast areas of wilderness. But others, including some of the thousands drawn to jobs in Las Vegas from distant states, resent the sleazy association of Nevada with sex.

Critics, claim Coffin, are misguided. The puritans, he says, forget that Las Vegas's economy relies on another kind of vice: "To many people, it's just a rotten borough anyway. Gambling in many states is looked upon as pretty evil, yet we tolerate it. I don't think brothels damage the image of Las Vegas at all."