Appeals court upholds “pole tax”

Last month, Texas Comptroller Susan Combs had stirred the latest controversy over the law by sending out letters to nude-entertainment businesses asking them pay up - even though the court appeal was still pending. less Last month, Texas Comptroller Susan Combs had stirred the latest controversy over the law by sending out letters to nude-entertainment businesses asking them pay up - even though the court appeal was still ... more Photo: Ralph Barrera / American-Statesman Photo: Ralph Barrera / American-Statesman Image 1 of / 1 Caption Close Appeals court upholds “pole tax” 1 / 1 Back to Gallery

AUSTIN - A state appeals court on Friday upheld the legality of the state's so-called “pole tax” on nude entertainment clubs, the latest decision in a six-year battle by Texas officials to collect a $5-per-customer fee at the more than 200 strip bars.

In a 16-page decision, the 3rd Court of Appeals overruled a challenge by the Texas Entertainment Association contending the law violated the Texas Constitution because it was an occupation tax from which 25 percent of the collections had to go to public schools. The appeals court ruled that it was an excise tax that could be spent however the Legislature wishes.

Enacted in 2007 to fund healthcare and programs against sexual assault, the tax has been controversial since it took effect. Many strip clubs refused to collect the fee, and others that did complained that it hurt their business and would eventually put most of the nude entertainment clubs in Texas out of business because patrons would be unwilling to pay the additional $5 fee.

State officials said Friday that only $17 million has been collected, far short of the $44 million expected.

“We conclude that the sexually oriented business tax's classification is not unreasonable because limiting the tax's applicability to businesses with audiences of two or more reasonably relates to adverse secondary effects that the tax is intended to address,” the court stated in its ruling. “Given that the (Texas) Supreme Court has already concluded that the sexually oriented business tax does not violate the First Amendment of the United States Constitution, we likewise conclude that it does not violate the free speech clause of the Texas Constitution.”

In its filings, the trade association that represents strip bars had argued that the tax violated those constitutional provisions.

State officials withheld comment until they could read the decision. But in the past, they have expressed an assurance that the law would be upheld.

Representatives for the entertainment association could not immediately be reached on whether Friday's decision would be appealed.

Last month, Texas Comptroller Susan Combs had stirred the latest controversy over the law by sending out letters to nude-entertainment businesses asking them pay up - even though the court appeal was still pending.

“Any claim that ongoing litigation is a basis for nonpayment of the Sexually Oriented Business Fee is not valid,” stated an April 11 letter to the clubs.

Court challenges were filed soon after the law took effect in 2008. Club owners initially argued in their lawsuits that erotic dancers were engaging in a form of expression protected by the First Amendment and that it unfairly would target strip clubs and put many out of business. Two years ago, the Texas Supreme Court rejected that argument, and the latest court challenges have centered on on whether the tax as being legally applied - an issue that the appeals court has how addressed.

Patrons at The Yellow Rose in north Austin made it clear they oppose the fees, no matter how good the cause.

“It's not a pole tax, it's just a punishment tax,” said a man who identified himself only as Derek, after he and several friends finished watching a dance routine. His friends agreed.

“The state is just looking for more money, but if clubs raise the cover by $5 to pay it, they'll price this out of business, like jacking up the taxes on tires or candy or soft drinks until nobody can afford them anymore.

“Tell them to leave the titty bars alone,” said one of the friends.