A state appeals court on Friday upheld the legality of the state’s so-called “pole tax” on nude entertainment clubs, the latest decision in a six-year battle by Texas officials to collect the $5-per-customer fee from more than 200 strip clubs.
In a 16-page decision, the 3rd Court of Appeals overruled a challenge by the Texas Entertainment Association contending the law violated the Texas Constitution because it is an occupation tax from which 25 percent of the collections must go to public schools. The appeals court ruled that it is an excise tax that could be spent however the Legislature wishes.
In its decision, written by Justice Scott Field, the appeals court rejected the clubs’ argument that the fee was an occupation tax and, as such, was unconstitutional because it did not allocate a quarter of the revenue collected to public schools as mandated in the Texas Constitution.
The court also dismissed arguments that the tax violated the state Constitution’s “equal and uniform” requirement by covering only nude-entertainment business where there is an audience of two or more, and not other adult businesses, such as lingerie modeling studios or adult movie arcades that cater to single customers.
“We conclude that the sexually oriented business tax’s classification is not unreasonable because limiting the tax’s applicability to businesses with audiences of two or more reasonably relates to adverse secondary effects that the tax is intended to address,” the ruling states. “Given that the (Texas) supreme court has already concluded that the sexually oriented business tax does not violate the First Amendment of the United States Constitution, we likewise conclude that it does not violate the free speech clause of the Texas Constitution.”
The decision notes that the Texas Supreme Court upheld the fee because it “was imposed to address the adverse secondary effects of combining nude entertainment with alcohol consumption, both by discouraging the activity through higher taxation and by generating revenue for programs designed to address the social harms that result.”
Businesses offering adult entertainment to one customer at a time do not have the same adverse effects, it states.
First the Comptroller’s demand for payment, now this. The original suit was filed on First Amendment grounds but lost at the Supreme Court. This was a different tack, but so far not any more successful. I’m sure this will be appealed to the Supreme Court, so maybe by 2016 we’ll have a final resolution, assuming the clubs don’t have some other argument in their back pocket in the event this one fails. The Trib has more.