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It was a bad week for the strip clubs

Another adverse court ruling.

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.

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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.

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4 Comments

  1. Bill Daniels says:

    The “pole tax” is unequal treatment under the law. If strip clubs must charge people just to walk into the door, then so should the local hardware store, pharmacy, and every other business. Picking one type of business to subject to extra taxation is wrong.

    What if the legislature passed “The hanger tax” and charged people $5 a pop to enter Planned Parenthood facilities, for example? That seem fair?

  2. matx says:

    If lawmakers really wanted to close down sexually oriented businesses, they could do it. They really want to close down Planned Parenthood in Texas and other family-planning clinics–and they’ve done a swell job with it.

    And the service you pay for at a strip club is to watch, so yeah, charging just to walk in seems fair since you get to see the show. I get charged to walk into a movie theatre to see the latest blockbuster movie.

  3. Bill Daniels says:

    @matx:

    When you spend money at a movie theatre, be it at the box office or the concession stand, the theatre is collecting and remitting sales taxes on your behalf. That’s fine, you pay sales taxes at most businesses. And prior to the pole tax, when you spent your money at a strip club, the club collected and remitted sales taxes on your behalf as well. They even collected tax at a higher rate than the theatre, because, well, we must apply sin tax to alcohol. Now comes the pole tax, another sin tax that the movie theatre patron doesn’t pay.

    Does this seem like equal treatment to you? Isn’t that what the NDO is supposed to be about? Don’t we want government to treat all citizens (and by extension, businesses) equally? Or are some businesses more equal than others in the eyes of government?

    Finally, just so we don’t confuse the issue, I would be perfectly OK with a strip club landlord or vendor charging the business more because they didn’t like that sort of business…..free market and all. But we can’t have government doing that to the strip clubs. Doing so would be like charging you property tax at a higher rate than me because the government doesn’t like the color of your house paint.

  4. matx says:

    I don’t know firsthand, but strip clubs require a minimum number of beverages be purchased – not exactly an admission charge. I don’t have to purchase a soda to attend a movie, just pay for a ticket.

    So perhaps you are against “sin” taxes: alcohol, cigarettes and according to some research SOBs also impose a greater economic burden to society due to increased crime & health impacts which are not confined merely to the individuals indulging in the activity. I do believe that SOBs lead to increased crime: violence towards women and human trafficking which diminish not only economic resources of society as a whole but (warning: personal opinion follows) also erode basic human decency which affects everyone.

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