Escort services now fall under the state’s newly revised live entertainment tax, but identifying the businesses to begin collecting the revenue has been a challenge for state officials.

People walk past a row of news racks in front of the Luxor on the Las Vegas strip on March 18, 2014. (Jason Bean/Las Vegas Review-Journal)

CARSON CITY — Escort services now fall under the state’s newly revised live entertainment tax, but identifying the businesses to begin collecting the revenue has been a challenge for state officials.

The difficulty in identifying the businesses, primarily in Clark County, is also putting a dent in the current two-year state budget to the tune of almost $20 million.

The Legislature in 2015 modified the tax, which is levied when various forms of live entertainment are provided to customers, and expanded it to cover escort services. The changes took effect Oct. 1, 2015.

Regulations implementing the modified revenue were approved on Wednesday by the Legislative Commission.

But Paulina Oliver, deputy executive director of the state Department of Taxation, said the agency has had no luck so far in identifying escort service businesses so the tax can be collected.

The agency has a list of about 50 escort businesses provided by Clark County, but the addresses either don’t exist or go to nothing but a room with a telephone, she said.

Oliver said part of the challenge is that the tax only covers escort services where no sex is provided. If sex is part of the transaction it is not covered by the tax, she said.

“It is an underground type of industry,” Oliver said.

Assemblywoman Irene Bustamante Adams, D-Las Vegas, called the collection effort “problematic.”

State Sen. Ben Kieckhefer, R-Reno, said the live entertainment tax is coming in below projections because of the lack of revenue from the escort industry. He urged the agency to “be diligent” in its efforts to collect the revenue.

The tax was projected to bring in about $73 million in the current two-year budget from non-gaming establishments.

Contact Sean Whaley at swhaley@reviewjournal.com or 775-461-3820. Follow @seanw801 on Twitter.