You can leave your hat on. But bring your wallet. The Texas Supreme Court has determined that a $5 entrance fee to strip clubs in the Lone Star State is constitutional.
The ruling comes after a protracted fight between strippers (I’m sorry, I meant “adult entertainers”) and the state. Three years ago, a Texas court ruled that the state could not impose a $5 per customer “pole tax” at strip clubs. The tax had been ushered in at the end of 2007 as part of the Sexually Oriented Business Fee Act and was targeted to clubs which served alcohol and allowed for nude dancing. The proceeds were intended to benefit victims of sexual assault and those who were uninsured in Texas, quite a combination. The tax met immediate resistance from the Texas Entertainment Association (“TEA”) which filed suit.
Initially, the TEA was victorious. In Texas Entertainment Association Inc. v. Combs, Judge Scott Jenkins ruled that the tax violated the First Amendment and did not effectively advance a compelling government interest. Addressing the issue of the beneficiaries of the tax, Judge Jenkins found, in part:
[t]here is no evidence that combining alcohol with nude erotic dancing causes dancers to be uninsured, that any dancer is in fact uninsured, or that any uninsured dancer could qualify for assistance from the fund.
The state appealed the ruling and, during the appeal, decided to collect the tax anyway.
Over the course of the arguments, the focus shifted from the beneficiaries to the issue of whether the tax is an attempt to suppress freedom of expression – in other words, the freedom to dance nude (or “nekkid” as they’d say in Texas). This week, the Texas Supreme Court disagreed with the lower and appellate courts, ruling unanimously that the fee – they’re calling it a fee now instead of a tax – is too small to be considered a limitation on the freedom of speech. The Court also ruled that the state has a legitimate interest in trying to curb the “secondary effects” of potential violence associated with alcohol and strip clubs. You can read the opinion here (downloads as pdf).
Among those happy with the results is the Texas Association Against Sexual Assault (“TAASA”). TAASA has long championed the tax, claiming that the “connection between strip clubs, the consumption of alcohol and sexual violence is well established.”
The Texas Supreme Court apparently agrees, noting that the fee is not an attempt to squelch free speech but instead aimed “at the secondary effects of nude dancing when alcohol is being consumed.” The Court went on to note that the tax isn’t imposed on all establishments which allow nude dancing, just those that serve booze. A business could “avoid the fee altogether simply by not allowing alcohol to be consumed.”
Attorneys for TEA have hinted that they are prepared to appeal the issue all of the way to the U.S. Supreme Court. That’s an interesting tactic considering how heavily the Texas Supreme Court relied on U.S. Supreme Court cases in its own opinion. But hey, posturing and hinting is part of the secret lawyer code. Wait, did I just give that away?
That said, I don’t expect this just to go away. The dollars involved are fairly significant. The state expected to collect $44 million in fees within the first two years – in this economy, that’s not the kind of money that the state will let slip away. And certainly, the businesses don’t want to forfeit that revenue.
Before you start typing furiously that this is a tax on customers, not businesses, let me clarify a key point: the strip club fee – though it’s figured on a per customer basis – is actually imposed on the business, not the customer. However, under the law, a business has the “discretion to determine the manner in which [it] derives the money required to pay the fee.” Realistically, customers will end up paying one way or another. Still, it’s an interesting distinction. And it gives the term “dancing for dollars” a whole other meaning.
