Texas Comptroller Susan Combs is pressing the state’s strip clubs to cough up millions of dollars she says they owe under a new “pole tax” even though the $5-a-patron fee still faces a court challenge.
“Any claim that ongoing litigation is a basis for nonpayment of the Sexually Oriented Business Fee is not valid,” insists an April 11 letter from the comptroller’s tax division that was sent to roughly 200 clubs in Texas that offer nude entertainment.
The fee, which strip club attorneys have claimed is an unfair tax, has been the subject of legal fights virtually since it was passed in 2007 as a way to fund programs for sexual assault victims and health care. The strip clubs’ lobby organization, the Texas Entertainment Association, filed a lawsuit challenging the constitutionality of the fee, arguing that erotic dancing is a form of expression protected by the First Amendment. But in 2011, the Texas Supreme Court ruled the fee did not violate free speech.
A new challenge, still under consideration by the 3rd Court of Appeals, argues that the “pole tax” is unconstitutional because the fees are not used appropriately. In the April 11 letter, Combs’ office said the continuing legal battle doesn’t mean the clubs can avoid paying all the fees they owe since the law took effect six years ago.
“They don’t like to be seen or heard,” state Rep. Harold Dutton, D-Houston, said of the club owners. “And I think that is what caused them to get in the ditch on this thing.”
So far, Dutton is the only lawmaker defending the clubs. In an April 23 letter to Combs, he asked the comptroller why her office decided last month to send out letters while the clubs’ latest court challenge is awaiting a decision from the 3rd Court of Appeals.
“I did send her a letter, asking her what has changed,” said Dutton, who opposes the fee. He said that if sexual assault programs need money, “the Legislature ought to step up to the plate and do that.”
Instead, what often happens, he said, is that lawmakers create fees against things they don’t like, like strip clubs.
“Where does it end once you start down that road?” he said.
A spokesman for the comptroller’s office, R.J. DeSilva, indicated in an emailed response that there was nothing remarkable about the timing of the collection notice.
“Our agency regularly sends notices or updates to taxpayers on various taxes and fees,” he wrote. “This particular notice was to remind business owners that the Sexually Oriented Business Fee is still in effect while litigation continues.”
In 2012, the U.S. Supreme Court declined to hear the strip clubs’ challenge after the Texas Supreme Court determined that the fee does not violate the First Amendment.
Now, the clubs are arguing that the state “fee” is really an occupation tax that should be directed to public schools under the Texas Constitution. They contend that the fee violates the state Constitution, which requires that one-fourth of occupation taxes go to public schools, because none of the money goes to schools.
The clubs’ attorneys are also asking the court to consider free speech provisions in the Texas Constitution, which they claim are broader than that of the First Amendment.
The state maintains that the fee is not an occupation tax, though, and it rejects arguments that it encroaches on free speech.
I must have missed the news about the second lawsuit, because I didn’t find anything in my archives about it. As noted, the original lawsuit was decided in favor of the state in 2011 by the Supreme Court, so it’s fair to wonder why now, almost three years later, the state is finally demanding payment from the clubs and rejecting the argument that ongoing litigation is no excuse. That said, while I may sympathize with Rep. Dutton about how the Lege should appropriate money for various things, the fact remains that the strip club fee was passed by the Lege and has been upheld by the Supreme Court, and wishing that the Lege did its business differently doesn’t change that. Not clear what effect, if any, this may have on the city of Houston’s strip club fee, which is also still being litigated.