I received the following press release concerning the letter sent by the Comptroller to Texas strip clubs that they had to pay the $5-per-person fee despite the injunction that was entered against it.
The Texas Entertainment Association (TEA) announced this morning that adult cabarets across the state received notification last week from the Texas Comptroller that controversial, industry-wide $5 admittance taxes are due today. The state’s surprise notification comes in the wake of the 53rd District Court’s March 28 ruling that the taxes represent an invalid, unconstitutional violation of First Amendment rights.
In its judgment, an Austin judge specifically ordered that the, “Defendants are PERMANENTLY ENJOINED from assessing or collecting the tax imposed by sections 47.051-.056.” The Texas Attorney General’s Office filed an appeal on April 7, and in letters issued to adult cabaret businesses across the state, the Comptroller’s Office states that its appeal suspends both the Court’s judgment and injunction.
Angelina Spencer, executive director of the Association of Club Executives, a nationwide organization of which the Texas Entertainment Association is a chapter, issued a statement on behalf of all the club owners in the TEA warning that businesses may be forced to close and that workers may lose their jobs due to this violation of the club’s First Amendment rights. In addition, she noted that if the state can set aside the U.S. Constitution by filing an appeal, other businesses may soon find themselves in the same situation:
“The Texas Attorney General and Comptroller have made a poor decision, attempting to collect a tax from Texas businesses that has already been determined in court to be unconstitutional. Now, based solely on the fact that the state has filed an appeal, the Comptroller’s Office has notified these businesses that the illegal tax must be paid today,” she said.
“Cabaret owners may be forced to shut down. In these economically tough times, hard-working taxpayers employed by these legal businesses deserve better than being forced out of gainful employment by elected officials seeking to impose a patently unconstitutional law on an unpopular industry for the purposes of political gain.
“This is a terrible precedent for all sides and should be of concern to all business owners. The bottom line is that this is a narrowly targeted and unconstitutional tax on legal but politically unpopular businesses. The law affects approximately 165 cabarets in Texas. That means it could happen to anyone when political winds shift. The definition of what a ‘deserving cause’ is, and who is a good target for a narrow tax is, may change also. Our only protection is the U.S. Constitution and our courts.
“TEA attorneys testified before the legislative committee that the tax was unconstitutional. Now the court has confirmed it. All our elected leaders are sworn to uphold the Constitution. The right thing to do is obey the court’s injunction until the appeal is decided and find another way to fund these worthy, but unrelated causes.”
You can see a copy of the demand letter here (Word doc). According to an FAQ that was included with that file, here’s the answer to the question “Have the clubs been collecting this fee?”
We cannot speak for all our members. Many clubs have, but there is confusion among our members as to how the fee is meant to be collected. If a patron enters, leaves and returns in a short amount of time, do we assess the fee twice? If the patron must stand outside to comply with smoking laws, do we charge him every time?
I have nothing to do with the Comptroller’s office, but I’d say the answer to those questions is No, unless perhaps it’s the club’s policy to make these customers pay the cover charge each time the re-enter. I hope for the clubs’ sake that their legal arguments in court are a bit sharper than that.
In the meantime, the clubs now have something else to worry about.
The state needs more robust laws to quickly shut down strip clubs and bars where minors are found performing, Attorney General Greg Abbott said today.
Addressing a state House of Representatives committee on licensing, Mr. Abbott recommended five ways to broaden laws governing sexually oriented businesses and to gather more information about who is working in them.
The hearing came on the heels of the Dallas City Council’s unanimous decision last week to tighten city ordinances after police discovered evidence that a 12-year-old girl danced nude in a Northwest Dallas club last year.
Though it is already against the law to sexually exploit a child, state and city officials have been looking for ways to shut down or sanction adult businesses more quickly.
[…]
State Rep. Rafael Anchia (D-Dallas) said the state needs to exercise more oversight of adult businesses at a time when his northwest Dallas district feels besieged by crimes involving the exploitation of girls.
“What we’re seeking to do today is bring the state and the cities closer together in a coordinated fashion …to deal with a lot of the rogue operators. For too long we have not had the requisite sense of outrage,” he said.
As I said before, it’s not been a very good year for the strip clubs.
Unless Texas appellate procedure is pretty weird, I would expect that the injunction would be in place unless the appellant got the appeals court to stay the injunction, which it would be very unlikely to do. But IANAL.