Strip Clubs Lose Another Round In Fight Against Texas' "Pole Tax"
Your friendly neighborhood strip club, it's safe to say, is no fan of the $5-per-patron "pole tax" the Texas legislature saw fit to levy in 2007. Its displeasure has been expressed in two ways: by refusing to pay (the tax has so far raised less than a third of the projected $44 million, prompting Comptroller Susan Combs to publicly urge 200 or so establishments
to pay up) and, through the Texas Entertainment Association, the industry's Austin-based lobbying arm, by engaging the state in a protracted legal fight.
That fight may be coming to a close. On Friday, a state appeals court rejected the TEA's claim that the fee violated the Texas Constitution, which requires that a quarter of revenue generated by an "occupation tax" has to be used to fund public education. Revenue from the pole tax, by contrast, is set aside to provide resources for sexual assault victims (all of the first $25 million raised) and low-income health insurance.
The Third District Court of Appeals in Austin ruled that the levy is not an occupation tax, because "the primary purpose of the sexually-oriented-business tax is not to tax these businesses for the privilege of providing nude entertainment in the presence of alcohol consumption. Rather, the tax's primary purpose is to discourage this type of business activity altogether while also generating revenue to ameliorate the type of social ills that are associated with this type of business."
Rather, it is a "general excise tax," which the legislature can constitutionally divert to whatever purpose it sees fit.
If this whole thing seems hopelessly legalistic, that's because the Texas Supreme Court disposed of the strip clubs' more sweeping argument -- that the tax violated First Amendment protections on free speech by singling out nude dancing for censure -- back in 2011.
The Texas Supreme Court, like the appeals court on Friday, decided that the law isn't directed at nude dancing per se but on combating its negative social impact. The U.S. Supreme Court declined to hear an appeal on the First Amendment case.
Send your story tips to the author, Eric Nicholson.