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Texas Strip Clubs Lose 'Pole Tax' Challenge

By Daniel Taylor, Esq. | Last updated on

Texas strip clubs may soon get a little more expensive.

A so-called "pole tax" on Texas nudie bars was upheld last week by Texas' Third Court of Appeals. The strip clubs had challenged the $5-per-patron fee as an unconstitutional occupation tax in the latest legal challenge since the law was passed in 2007.

What was the legal thrust behind the clubs' latest challenge? And where does this leave Texas' "live nude entertainment" industry?

Fee on Sexually Oriented Businesses

The pole tax, known officially as the "Fee on Sexually Oriented Businesses," imposes a $5 fee for each entry by a customer to a sexually oriented business that provides live nude entertainment or performances and allows alcohol consumption on its premises.

As Bloomberg reports, the Texas Entertainment Association led a challenge to the tax on First Amendment freedom of speech grounds, but was denied relief by the Texas Supreme Court. The U.S. Supreme Court declined to hear the case.

Not an Occupation Tax, Appellate Court Rules

The more recent challenge to the Sexually Oriented Business Fee claimed that it was actually an occupation tax and therefore in violation of the Texas Constitution, which requires that 25 percent of all occupation taxes go to public schools. The money from the sexually oriented business fee is used to fund programs for sexual assault victims and health care.

The strip clubs also claimed the tax was unfair, as it only targeted clubs that provide live nude entertainment, and thus allegedly impaired the clubs' rights to free speech under the Texas Constitution.

The Texas Third Court of Appeals, however, ruled against the clubs on all three grounds. The clubs now face a tough decision: Should they continue the legal challenges, which are now in their seventh year, or relent and pay the tax?

The problem, reports The Texas Tribune, is that the tax would be charged on the clubs retroactively, which could put some clubs out of business entirely.

The clubs could also avoid the fee entirely by disallowing alcohol, as the court mentioned in its decision. And as a separate Texas court has explained, the clubs can also potentially get out of the fee by having their dancers don itsy bitsy teeny weeny bikini tops.

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