Pole Tax

Two Philadelphia strip clubs are appealing huge taxes levied against them by the city based on a so-called amusement tax that usually is applied to admission fees but in this case someone dreamed up the wheeze that it should also apply to lap dance revenue. The taxes are not slight, Club Risque was charged $320,538, and Cheerleaders was charged $486,482.

Club attorney, George Bochetto, called foul, accusing the city of auditing lap dance revenue and then going back five years and tacking on fines. It's over the top. Unbelievable, he told Philly.com:

The clubs, of course, pay business taxes in addition to the amusement tax, and dancers are supposed to pay income and wage taxes. An informed City Hall source says the city feels it can run an amusement tax up the pole because the lap dance is a separate experience.

Bochetto says that's double-dipping.

New York's highest court is set to hear arguments on whether Nite Moves , a strip club in suburban Albany, deserves a state tax exemption similar to that for theater or ballet.

State tax officials say the club owes an 8% sales tax for admissions to the club and for so-called couch sales, where patrons pay for private lap dances, the Associated Press reports.

Nite Moves claims the dances are exempt under state tax law as live dramatic or musical arts performances, which applies to theater and ballet, the AP reports.

New York Attorney General Eric Schneiderman's office argues in its briefs that some Nite Moves performers have no dance training and simple pick it up by watching. Such a dancer isn't engaged in a genuine choreographic dance performance when she removes her clothing, the brief says.

But Stephen Dick, the club's CFO, dismisses the notion that formal training should be any critera when its comes to entertainment.

Houston council voted this week to levy a $5 fee on strip club customers of the city's 30 licensed strip bars. This in addition to the $5 fee to the state of Texas when visiting an adult venue, thanks to a law passed in 2007.

The moral tax will be ring-fenced and put towards analysing forensic evidence collected from rape victims.

Supporters of the so-called pole tax argue that lap-dancing clubs must shoulder some of the financial burden of rape investigations , on the supposed grounds that their businesses help foster misogynistic attitudes towards women, which can lead to sexual assaults. If they were being fair about it then the tax would have been better targeted at the Catholic Church.

The morality tax was passed by 14 votes to one. The ordinance stipulates that the fee also applies to bars and night-clubs which offer one-off events that could be construed as sexually explicit, such as wet T-shirt contests or naked sushi contests .

Albert Van Huff, a Houston lawyer who represents strip clubs, told the Journal that the tax is based on flawed logic. There is no known correlation between people going to nice, high-end gentlemen's clubs and rape, he said.

Another strip club tax is being considered by California's Legislature. AB 2441 is set to place a $10 fee on visitors of establishments that offer alcohol and topless or nude performances.

It's the fourth attempt to tax sexually explicit businesses in the past four years in California. All of those bills, which would have levied a 20% sales tax were shot down. A tax raising bill requires a two-thirds vote of both the Assembly and Senate.

AB 2441, however, would be the first legislative action to mandate a fixed-fee pole tax .

JA spokesman for Californian Assemblyman Das Williams said that strip clubs are a good possible resource for funding because there's already a model to tax adult entertainment establishments. Pole taxes are now mandatory in Texas and Utah, with legislation being mulled for similar tariffs for adult entertainment customers in Illinois, New York, New Jersey, Pennsylvania and Tennessee. He said that the bill is on track in the Assembly and could be approved by both houses in September.

A Tennessee lawmaker has proposed a 25% on adult businesses and products that he claims could increase state revenue by $55 million.

According to local News Channel 5, Joe Carr believes the sin tax could help Tennesseans by tapping the state's $222 million annual porn business. He said:

If we can't outlaw it, and the Supreme Court says we cannot, then what we'll do is put a 25% tax on adult material, hard core pornography.

The lawmaker said it's not just about the money, but more about the harm porn is doing to local marriages.

But some Constitutional experts think the proposed bill probably violates the First Amendment. States have a legal right to tax so-called vices like liquor and tobacco but they're commercial products and don't have any First Amendment aspects attached to them as porn does.

The Missouri Supreme Court has ruled that repressive regulations prohibiting nude dancing and restrict other kinds of adult entertainment don't violate the Missouri or U.S. constitutions.

The restrictions are not content-based limitations on speech but rather are aimed at limiting the negative secondary effects of sexually oriented businesses on the health, welfare and safety of Missouri residents, the court claimed in its unanimous ruling.

The state's adult entertainment industry sued last year to block the law's requirements. Industry experts say business has been down over 75% at Missouri strip clubs.

The law, enacted earlier this year, prohibits full nudity at sexually oriented businesses, and mandates early closing at midnight. The law also cuts off alcohol at those businesses and prohibits semi-nude (female breasts exposed below the nipple or uncovered male or female buttocks ) employees from touching customers. It also says stages on which seminude dancers perform must be at least six feet from customers and at least 18 inches high.

The Texas Supreme Court has upheld a 2007 strip club entry fee tax, commonly known as the pole tax , claiming that the $5 charge doesn't substantially impact erotic speech and is justified as a tool to prevent the secondary effects allegedly caused by the combination of naked, gyrating female bodies and alcohol consumption.

Because the fee is content-neutral and satisfies the four-part O'Brien test, we conclude that it does not violate the First Amendment, wrote Justice Nathan L. Hecht for the unanimous court panel.

But as those who've been following this litigation know, the issue of using the fee to combat secondary effects was an idea introduced rather late in the game.

This is just a source of revenue; it has nothing to do with secondary effects, an attorney stated: The lady that authored the bill, when she presented the bill for the first time in committee, said, 'We are not claiming a link between topless bars and sexual assault.' She was specifically asked that question.

That link was contested statistically by a professor at the University of Texas, and it was also contested in the sense of, there was no evidence introduced supporting that theory... There was no evidence that there had been sexual assaults in the neighborhood, which is the basic secondary effect concept. They had evidence from a professor and a former police officer-turned-investigator that talked about sexual offenses in connection with entertainers, and they were assaultive type offenses, but not committed by patrons, and not in the neighborhood.

Of the 169 clubs to which the fee applies, the attorney estimated that more than half could be put out of business because of the fee; that another 30% would be hurt, while just 20% would be minimally affected.

Lap dancing cannot be considered an art form, a New York state court hearing a tax dispute has ruled.

The owners of the Nite Moves strip club in Albany had argued the business should not have to pay sales tax on money earned from admission fees and lap dances. It claimed a state law that makes dramatic or musical arts performances exempt from sales tax should include strippers' dances, whether they are on a stage or in private booths.

The five judges at the Appellate Division, Third Department disagreed with the idea that stripping could enjoy the same tax status as ballet and ruled against the club.

Justice John Egan Jr said Nite Moves had failed to establish that private dances were genuine choreographed performances and suggested the strippers usually learned their trade from videos or watching colleagues. He added: The record reflects that the club's dancers are not required to have any formal dance training.

Nite Moves' lawyer, Andrew McCullough, said the club would appeal against the ruling, on the grounds the court had made a value judgement on the artistic merits of lap dancing.

Expectations were high six years ago when the Utah Legislature enacted a 10% tax on escort services, and semi-nude and fully nude clubs.

Lawmakers predicted the tax on sexually oriented businesses would rake in up to $1 million per year, which was earmarked to pay for sex offender treatment programs and investigations of Internet child sex crimes.

But the potential tax base was whittled down when the Utah Tax Commission exempted semi-nude clubs. And later the Utah Supreme Court struck down the portion of the law applying to escort services.

As of Tuesday, when the U.S. Supreme Court declined to hear a challenge to the tax mounted by strip club owners, just one club remains affected by the decision: Southern Exposure in Salt Lake City, which features full frontal nudity.

There's not enough money in this tax to justify collecting it, said attorney Andrew McCullough, who represents the owner of Southern Exposure.

Charlie Roberts, a spokesman for the Tax Commission that the amount of tax collected from Southern Exposure was not very much.

Cole County Circuit Court Judge Jon Beetem has ruled in favor of a sweeping law that would impose unprecedented restrictions on adult businesses in Missouri.

In denying a temporary restraining order request Friday afternoon by a consortium of adult businesses, Beetem cleared the way for the law to go into effect Saturday.

Among other restrictions, the law prohibits full nudity and the serving of alcohol, forces semi-nude dancers to remain on a stage and at least six feet from patrons—rendering lap dances impossible—prohibits closed-door booths for the viewing of movies, requires that patrons remain within the clear view of employees, and mandates that adult businesses close by midnight.

According to the Associated Press, Judge Beetem said the coalition had failed to show their lawsuit is likely to ultimately succeed or that they will suffer irreparable harm by allowing the law to take effect. The operative word there would seem to be irreparable. During a hearing before Beetem, lawyers for the businesses insisted that the harm could very well be irreparable, and would certainly seem that way for the employees who will now certainly lose their jobs because of the severe restrictions that are about to be imposed.

But while Beetem acknowledged in his ruling that the law will undoubtedly change the business practices of strip clubs, adult video and book stores and other businesses of a sexual nature, and that they will likely suffer some economic loss, he added that economic loss alone does not alter the analysis of the legal issues.

Update: Setback

9th February 2011. See  article from  business.avn.com

Judge Jon Beetem has tossed a constitutional challenge to a state law enacted in 2010 that imposed sweeping restrictions on adult businesses in the state. Despite the ruling, which was anticipated, adult bookstore and club owners say they will appeal the case to the state Supreme Court, where they figured it would end up anyway.

State Senator Matt Bartle's eight-year mean minded quest to crack down on Missouri strip clubs finally succeeded this week.

The state Senate voted 27-4 for legislation that will ban full nudity and prohibit adult businesses from selling alcohol. The clubs also would have to close between midnight and 6 a.m.

Most human beings understand that if you mix alcohol and women dancing in the nude, that's a tough combo, said Bartle: Bad things happen.

The vote, combined with the House's 118-28 vote earlier, sends the bill to Governor Jay Nixon. A spokesman for the Democratic governor said he was inclined to sign it. He is generally supportive of tighter restrictions on these types of businesses, spokesman Jack Cardetti said.

Opponents said if enacted, the new law will almost certainly result in a court challenge. They said the law will hurt all strip clubs and hundreds, and maybe thousands, of workers will lose their jobs.

Under the proposal, the adult entertainment industry would undergo  major restrictions. Juice bars that don't sell alcohol, but present nude dancers would be outlawed. Semi-nude dancers would have to stay at least 6 feet away from patrons and no touching would be allowed.

All that lap dancing stuff, that's gone, Bartle said.

Adult businesses could not operate within 1,000 feet of a school, church, day-care facility, library, park, residence or another adult business. Operators of any adult establishment would have to have an unobstructed view…of every area of the premises.

The bill's passage came on the second to last day of the 2010 session and represented Bartle's last shot at passing a bill because he is retiring from the Senate.

The Texas Supreme Court has decided to review the legality of charging a $5-per-person pole tax to patrons of strip clubs and other adult entertainment venues, a case that has hinged on whether the government can tax content protected by the First Amendment.

The law, passed in the 2007 legislative session, originally directed revenues collected from the fee toward sexual abuse and violence treatment and prevention programs, but it has been mired in legal wrangling almost since it took effect in 2008.

I'm extremely happy that they agreed to hear the case, said State Rep. Ellen Cohen, who sponsored the legislation and filed an amicus brief urging the court to review the matter. If you're going to do this, you need to raise a substantial enough amount of money to make a dramatic effect on issues surrounding sexual violence. The way we fashioned it was absolutely the correct way and the most reasoned way.

The law was struck down in March 2008, by a Travis County District Court judge, a ruling that was upheld in June by the Austin-based 3rd Court of Appeals. The state has collected more than $12 million in fees that have been held in escrow pending the final outcome of the case.

David A. Furlow, a former Harris County prosecutor who has represented businesses in numerous cases involving First Amendment protections, said the central issue is whether the government can levy a tax on speech, such as a newspaper or TV show or dancing in a strip club, that has the effect of singling it out.

When you say certain types of messages and certain types of entertainment can be taxed, you begin down a slippery slope that can allow the government to destroy a form of business by taxing it out of existence, he said. You start down a pathway that could lead to censorship-based government like that which exists in Iran.

To defend the law, the government has been forced to argue that strip clubs lead to greater violence against women, a claim for which there is no evidence, Furlow said. Under such logic, he added, R-rated movies could be taxed because of the violence sometimes depicted in them.

The Utah Supreme Court has ruled that a state tax on strip clubs is constitutional but that the same tax on escort services is not.

Passed in 2004, the tax levies a statewide 10% tax on admission and user fees charged by sexually-explicit businesses, defined as any business where a nude or partially denuded employee or contractor performs any service. Utah-produced merchandise, food and drinks sold by these businesses also are subject to the tax.

The statute also levies a tax on escort services, which are defined as any person who furnishes or arranges for an escort who is compensated to accompany another individual for companionship. An escort is any individual who is available to the public for the purpose of accompanying another individual for compensated companionship.

Associate Chief Justice Matthew B. Durrant said that the state's Sexually Explicit Business and Escort Service Tax is content-neutral when applied to nudity.

In this case, application of the tax is triggered by nudity, which the Supreme Court has specifically declared 'is not an inherently expressive condition, Durrant wrote. Because it is not inherently expressive, nudity is unprotected conduct rather than protected expression.

Regarding the taxing of escort services, Durrant found that the language was fatally overbroad, but opened the door to a legislative revision that included more specific language. Nowhere does the statute define an escort in terms of nudity, he wrote. The statute also fails to define the term 'companionship.' Therefore, according to the plain terms of the statute, individuals who are paid for providing care for the elderly as well as those who are paid as tour guides would fall within the definition of an 'escort,' and any person or business who employs them would be subject to the tax.

A California bill that would have imposed a 20% tax on sales of adult movies and sex toys, as well as the receipts of strip clubs, has been voted down by a legislative panel. The bill was voted down in the Assembly Tax and Revenue Committee.

California Assemblywoman Mary Salas, D-San Diego, sponsored the proposal, which would have sent revenue from the tax to a newly created Adult Venue Impact Fund.

The fund would then have been distributed to local law enforcement agencies in an effort to deal with secondary effects that are supposedly associated with adult entertainment businesses.

Salas' chief of staff, Francisco Estrada, told XBIZ that the assemblywoman was deeply disappointed by the 5-4 vote against the bill: At this point, we're not sure if the bill will be resurrected .

A California bill that would impose a 20% tax on sales of adult movies and sex toys, as well as the receipts of strip clubs, has been introduced in the Legislature.

California Assemblywoman Mary Salas introduced the proposal, which would send revenue from the tax to a newly created Adult Venue Impact Fund.

The fund would then be distributed to local law enforcement agencies in an effort to deal with supposed secondary effects that are associated with adult entertainment businesses.

Free Speech Coalition lobbyist Ignacio Hernandez said the bill could be found unconstitutional on several points, including taxation based on the content of a movie: This measure is clearly unconstitutional and unworkable. This bill is much broader than previous efforts to tax adult movie and novelty retailers. Therefore, it suffers from greater constitutional defects than prior bills.

Hernandez said the broad definition of harmful material included in the bill's language would likely be opposed by entertainment organizations like the Motion Picture Association of America.

Specifically, Assembly Bill 847 would levy a 20% on the gross receipts of any California business that is:

• A retail establishment whose gross receipts from the sale or rental of adult material exceeds 50% of all gross receipts.
• Providing a public or private viewing of adult material.
• An establishment that offers live sexually explicit conduct that is prohibited to audiences under 18 years of age or 21 years of age, depending on whether alcoholic beverages are sold on the premises.

A hearing on the latest proposed porn tax bill is scheduled for next month.

A Texas Court of Appeals panel has upheld a lower court ruling striking down a tax that imposed a $5 tariff for each customer entering a sexually oriented business (SOB).

On appeal, Texas Comptroller Susan Combs argued that the SOB tax does not violate the 1st Amendment nor the Texas Constitution, that sovereign immunity bars suit by the Texas Entertainment Association and that the trial court erred in awarding attorneys fees.

But the appeals court judges had concern over a tax that was a content-based speech regulation and subjected to the strict scrutiny required to determine if the regulation were narrowly tailored to serve a compelling governmental interest.

Evidence that the SOB tax is aimed at reducing secondary effects of sexually oriented businesses does not preclude the proper application of strict scrutiny in this case, the court ruled.

In addition, the court overruled the sovereign immunity and attorneys fees claims by the Texas comptroller.

At post time, it wasn't clear whether the comptroller will appeal the decision to the Texas Supreme Court.

A proposal to levy a $5 tax on sex acts in Nevada has died in a state Senate committee.

The 3-4 vote Thursday in the Nevada Senate Taxation Committee was one shy of the four needed to keep the proposal afloat.

Committee Chairman Bob Coffin, the Las Vegas Democrat who sponsored the bill, says the state is desperate for revenue and has not collected taxes from prostitution since it was legalized in some rural counties more than 30 years ago.

Texas legislators have given a green light for a new tax on sexually oriented businesses that would replace a measure that taxes patrons entering strip clubs.

Under H.B. 982, a $5-per-person gentlemen's club fee would be repealed and replaced with a 10% tax to those sexually oriented businesses that charge an admission fee.

The bill, introduced by Representative Senfronia Thompson and endorsed by the adult entertainment industry, passed the House on Thursday.

This bill is unlike the $5 admission tax that has been tied up in the courts since the last legislative session, Thompson told XBIZ: The free-speech issue that has dogged that one has been eliminated with this bill. We are charging a tax, in this case, to do business in the state of Texas.

Thompson noted the proposed tax does not target nude dancing, a form of expression a Texas court ruled is protected by the First Amendment.

She said that the bill was hammered out with the help of members of the Texas Entertainment Association, which is an industry trade association for Texas strip-club owners. She noted that there are 115 known strip clubs in the state.

The bill's target is strip clubs, but it could be expanded to other sectors. H.B. 982 defines sexually oriented businesses to include any commercial enterprise selling, renting or exhibiting items [and services] intended to provide sexual stimulation or sexual gratification to the customer.

Strip owners who have paid the state under the old fee would get a credit toward the new tax, which would go into effect as early as July 1. Thompson said that the bill has moved on to a fast track in the Legislature and could be signed into law by the governor within weeks.

Nevada senator Bob Coffin has proposed a $5 tax on every prostitution transaction that occurs in the state, according to a Las Vegas Sun report. Coffin says the tax would raise an additional $2 million a year for Nevada, and a lobbyist for the legal brothel industry supports the idea.

I think we will support [the tax], said George Flint, director of the Nevada Brothel Owners Association. There are 28 legal brothels operating in Nevada, along with illegal unlicensed prostitution, and prostitution is actually illegal in the city of Las Vegas. Coffin's proposed tax would apply to both legal and illegal prostitution.

The proposed tax would be paid by customers, not levied from the prostitutes' wages.

Florida legislators are looking at next year's budget and trying to figure out how to balance it — and one of the answers they're coming up with is to do it partly on the back of the state's adult industry.

According to an article on MSNBC.com, two (unnamed) state legislators have argued that new taxes on sex businesses should be considered, encompassing every facet of adult products from sexually oriented websites to the novelties and lingerie sold at boutiques, to DVDs and magazines sold at adult book- and video stores. And they haven't forgotten door fees at adult nightclubs, either.

No such content-based taxes have successfully been enacted except for a $5 adult club entry surcharge in Texas, and even those proceeds are being escrowed as Texas club owners continue to fight that pole tax. Similar attempts in Washington state, New York and California have been defeated.

It's a vast untapped source of revenue in Florida — one that could be as reliable as taxes on drinking and smoking, MSNBC's reporter wrote, recognizing however that: One barrier to such a tax is that opponents would try to overturn it on grounds it could violate free speech rights.

Texas State is holding $11.2 million in fees collected from strip club patrons pending the action of an appeals court.

A $5 fee for strip club patrons was passed into law in 2007, with the money collected to fund sexual assault services in 54 Texas counties and health insurance programs. Last year, a judge struck down the law, saying that topless dancing was protected as free speech and that the state couldn't show a link between strip clubs and inadequate health insurance. The state has appealed, and the appeals court has not yet ruled.

Though the Texas Comptroller's Office continues to collect the fee, only some topless clubs are paying it. Some clubs have argued that collecting the money while the bill is under consideration in court is unfair and affects their cash flow as the economy slows. The $11.2 million collected is lower than the $40 million that legislative analysts projected in the law's first year.

Representative Ellen Cohen, who authored the original 2007 bill, is pushing a new version this year, which drops the charge to $3 and sends all proceeds to sexual assault programs. Lawyers for the clubs say they'll take it to court if it passes.

We will continue to fight until they stop filing unconstitutional legislation, said Stewart Whitehead, an attorney for the Texas Entertainment Association, which represents topless clubs in Texas: These changes don't get them around the fact that they are taxing constitutionally protected speech.

Brooklyn Assemblyman Felix Ortiz introduced a bill that would require gentlemen's club patrons to pay the state $10 every time they visit.

Ortiz said the fee could raise as much as $500 million, which would be earmarked for victims of human trafficking, domestic violence, sexual abuse and child prostitution.

We have to protect people who have been victimized by unscrupulous individuals, and we cannot continue, especially in this economy, to have government pay for everything, Ortiz said.

Ottiz' bill has yet to find a sponsor in the state senate.

State Assemblyman Alberto Torrico has introduced a bill that would place a tax on adult entertainment products sold in California.

The tax percentage was not written into the bill introduced Friday; however, Torrico spokesman Jeff Barbosa told XBIZ that the bill is still in the beginning process” and that legislative analysts will provide a tax amount shortly.

The timing of Torrico's proposal comes on the heels of dwindling state coffers, as well as the assemblyman's push to provide a domestic abuser surveillance fund to track abusers and stalkers.

The bill's language, as it stands, only includes a proposed tax on the sale of harmful matter goods at the retail level.

Representative Mark Miloscia gave it his best shot, but his proposal to tax adult entertainment products and services to fund unemployment and welfare benefits is dead - mainly because it's too complicated.

According to the Seattle Post-Intelligencer, Rep. Ross Hunter , chair of the state House Finance Committee, had originally said he'd give a hearing to House Bill 2103,  but thought better of it after remembering that the state had previously signed onto the 2002 Streamline Sales and Use Tax Agreement, whose fundamental purpose is to simplify and modernize sales and use tax administration in the member states in order to substantially reduce the burden of tax compliance.

Miloscia's porn tax bill, it seems, in attempting to put a tax on goods based on their content, wouldn't fly under the simplification agreement - and besides, a tax based on content is just unconstitutional.

A Georgia state senator said that he is thinking of imposing fees on strip club patrons supposedly to help fund programs for victims of sexual abuse. Surely the reality is more moral than charitable.

The legislation, proposed by Senator Jack Murphy, would charge between $3 and $5 per visitor at every strip club in Georgia. Murphy says he would forward the additional revenue to therapeutic programs for victims of child prostitution and other forms of sex-related abuse because the state has cut funding for a lot of such services to compensate for statewide falling revenues.

Although Lt. Gov. Casey Cagle, who presides over the state senate, says he is reluctant to add such a fee because this is not the time for raising taxes.

Many in opposition to the proposed legislation argue that a fee would not only make a difference, but also put many of these strip clubs out of business.

You’re not just putting a tax on the patrons of the adult clubs, said Aubrey Villines, a lawyer who has represented strip-club-owner Jack Galardi. What does it do to the waitresses, to the food workers, to the parking attendants? The people who all depend on this industry for work?

A similar strip-club fee of $5 per patron was instated in Texas in January 2008. In this case, a state district judge ruled in March that the fee was unconstitutional in that it violated the First Amendment.

Murphy says he will announce his final decision after consulting legislative leadership.

With the state facing a dire budget crisis, a California politician plans to introduce new legislation that would tax consumers of adult entertainment.

Democrat  State Assemblymember Alberto Torrico said he plans to push for new legislation that would place a tax on the goods and products associated with the adult entertainment industry.

Torrico's spokesman Jeff Barbosa said the amount of the tax had not been determined, but the legislation could be introduced within a few weeks.

The timing of Torrico's proposal comes on the heels of a similar bill's defeat in August. A 25% excise tax on adult products and productions proposed by Assemblyman Charles Calderon gained no traction in the assembly and died in committee.

California Assembly Bill 2914, which would have imposed a 25% excise tax on adult products and productions, has died in committee.

The outrageous tax burden would have applied to all businesses that either sell or produce sexually explicit shows, movies, books and magazines — as well as websites. It was proposed by Democratic Assemblyman Charles Calderon.

According to Diane Duke, Executive Director of FSC, who attended one of the bill's hearings, the people Calderon got to testify were very inflammatory: [They] were telling lies about the industry; that people were committing suicide and that drugs were rampant on the set. Of course, we had people from the set there to testify that [those things] are not happening.

Some opponents opposed the bill on the belief that the government shouldn't be involved in people's sex lives; some saw it as a violation of free-speech rights as it singled out the adult industry, which could have been forced to leave the state; while others saw it as a simple case of the Democrat's trying to pile more taxes on legitimate business owners.

A $5-per-customer fee on Texas strip club patrons dubbed the "pole tax" has been declared unconstitutional.

A state district judge ruled that clubs can't collect the fee. The charge went into effect in January and was expected to raise about $44 million.

Judge Scott Jenkins wrote in the March 28 decision that the fee, while furthering laudable goals, violates the First Amendment to the United States Constitution and is therefore invalid.

The Texas Entertainment Association Inc., which is a group of topless clubs, and the owner of an Amarillo club, sued Texas Attorney General Greg Abbott and Comptroller Susan Combs over the fee.

Witnesses for the strip clubs testified at a hearing last year that the clubs would go out of business if they had to collect an additional $5-per-patron fee.

Lawyers for the state had said the Legislature was within its rights to impose the fee on businesses that serve alcohol and offer nude performances.

Attorneys for the state have argued that the fee does not prohibit nude dancing, does not regulate what entertainers wear and does not regulate the businesses in other ways. The state can appeal the decision.

Update: Unconstitutional Tax Continues

23rd April 2008

State District Judge Stephen Yelenosky has told attorneys for Texas strip clubs that the state can continue to collect a controversial strip club fee — which was struck down as unconstitutional three weeks ago — while the state appeals the ruling.

Attempts to block a state-imposed $5 fee on Texas gentlemen's club admissions — slated to go into effect Jan. 1 — so far have failed.

District Judge Scott Jenkins refused to block the tax from going into effect, paving the way for a lawsuit that seeks to prove the unconstitutionality of the tariff, which plaintiffs contend is discriminatory, suppresses their right to free speech and endangers the survival of many affected businesses.

The tax initiative is intended by officials to raise an estimated $50 million annually.

A trial date is expected to be set after Jenkins rules on the plaintiffs' legal standing and ability to sue the state.

Texas Attorney General Greg Abbott and state Comptroller Susan Combs submitted a legal brief to the court, stating that the fee does not prohibit nude dancing, does not dictate where live nude entertainment may be presented, does not require any minimum clothing and does not govern the physical setting for the activity.

Even though the state does not specify how the $5-per-customer fee should be collected, most club owners are expected to collect it as part of a cover charge.