An appeals court ruled on May 9 that Texas strip clubs will be forced to pay a “pole tax,” according to the Texas Tribune. More specifically, strip club owners must pay millions of dollars that Comptroller Susan Combs insisted they owe due to a $5-per-customer tax imposed several years ago.
Combs’ demand was met by plenty of opposition from business owners. The tax was initially passed in 2007, and the funds collected are given to sexual assault programs. Almost immediately after the tax went into effect, the Texas Entertainment Association sued the state and claimed that the fee is unconstitutional.
Lawyers representing Texas’ 200+ nude entertainment clubs argued that stripping is a form of expression that is protected under the First Amendment.
Although the Texas Supreme Court ruled in 2011 that the fee does not violate the clubs’ freedom of speech, the 3rd Court of Appeals recently considering a new challenge which asserted that the collected fees are not being used appropriately, according to the Star-Telegram News. Lawyers representing strip clubs said that the Texas Constitution requires that all occupational taxes go towards schools.
But a Texas Third Court of Appeals ruled that the fee is, indeed, constitutional. “We … render judgment that the sexually oriented business tax is not an occupation tax and thus there is no requirement that 25 percent of its revenue go to public schooling,” the court said.
According to reports, the comptroller’s office claims the tax should have funneled in $44 million–so far, only $14 million has come in from clubs, the Star-Telegram reported.
In a letter to several hundred strip clubs, the comptroller’s tax division reportedly wrote, “Any claim that ongoing litigation is a basis for nonpayment of the Sexually Oriented Business Fee is not valid… There is no basis to withhold payment.”
R.J. DeSilva, a spokesman for Combs, added in an e-mail obtained by Bloomberg News, “Our agency regularly sends notices or updates to taxpayers on various taxes and fees. This particular notice was to remind business owners that the sexually oriented business fee is still in effect while litigation continues.”
Rep. Harold Dutton (D-Houston) is reportedly the only lawmaker who has voiced support for the clubs.
Dutton told the Star-Telegram that he sent Combs a letter in late April, asking why her office recently demanded the funds even though the tax’s constitutionality is currently unclear. Combs allegedly responded, telling him that the sexual assault programs need funding and that “the Legislature ought to step up to the plate and do that.”
Dutton cautioned that the pole tax, if deemed constitutional, could open up a Pandora’s box for increased government control. Essentially, state lawmakers could simply choose to tax anything they don’t like.
He asked, “Where does it end once you start down that road?”
Rep. Dutton did not immediately return calls from Breitbart Texas.
Follow Kristin Tate on Twitter @KristinBTate.