The ruling by New York's highest court means that the revenues derived from said dances are taxable, because they are not entitled to the exemption in state law for "dramatic or musical arts performances."
The majority appears to have compared lap dances to ice-dancing routines, which are not entitled to the exemption. The lower court's conclusion that if that's the case, then "women gyrating on a pole to music" are also not exempted, was not irrational, according to the majority. That seems to suggest a fundamental misunderstanding of the concept of a lap dance, although on second thought, maybe it doesn't.
The three dissenters said the majority hadn't focused on the actual words of the law, which uses the phrase "live dramatic, choreographic or musical performance." The term "choreographic performance" means dance, the judge wrote, and certainly these women are dancing. Therefore, the exemption should apply.
Because there are First Amendment issues involved, and because of the close decision, it's entirely possible that a petition for certiorari may be filed with the U.S. Supreme Court. Sadly, the odds that the Court will accept it are low, but I'm keeping my fingers crossed.