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Texas House Votes To Replace One Tax With Another

What can you expect from a state that made Alberto Gonzales a judge?

Texas House Votes To Replace One Tax With Another

AUSTIN, Tex. - By a vote of 141-1, the Texas House of Representatives has voted to repeal the $5 admission tax the state had levied on strip clubs last term, and to implement a tax on the gross receipts of any adult business in the state that charges an admission fee.

Let's see: Adult bookstores? Nope, they don't charge admission fees. Adult video stores? Same thing. Adult movie theaters? There aren't many if any of those left in Texas. Massage parlors? No, no admission fee there either.

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Wait a minute; seems the only adult businesses that charge an admission fee in Texas are ... strip clubs!

The bill, HB 982, authored by Rep. Senfronia Thompson (D-Houston), would bring in substantially less revenue than the admission tax proposed in 2007 by Rep. Ellen Cohen (D-Houston), but the legislature seems to have great faith in Texans' appetite for exotic dance: The bill requires the state comptroller to allocate one-fourth of the revenue generated from the tax to the "foundation school fund" and three-fourths to the general revenue fund, which in turn will put those proceeds into the state's sexual assault program fund - an amount estimated to be at least $25 million.

Cohen herself also has a proposal pending that would reduce the admission tax to $3 , the proceeds of which would also go to the sexual assault program. The original $5 fee had been earmarked for a fund dedicated to providing healthcare for the poor, but earlier this year, a court held that such taxes could not be collected unless a nexus could be shown between the activity being taxed and the services for which the revenues would be used.

However, since the previous year's admission tax has been tied up in litigation and escrowed ever since it began being collected, all monies which a club has collected under the previous tax may be taken as a credit against the new tax - which also likely will wind up in litigation, and its revenues escrowed. In March, the Comptroller's Office announced that it was holding $11.2 million in fees collected under the 2007 tax.

The law requires the new tax to be reported to the Comptroller of Public Accounts within one month after the end of each fiscal quarter, and levies a penalty of 5% of the tax due if the club fails to file the report of taxes owed or fails to pay the amount by the due date, and an additional 5% if the report is not filed or the taxes not paid within 30 days after the due date.

The new tax is scheduled to take effect on July 1 if passed by a two-thirds vote of each legislative house - and if it fails to receive that plurality, it will take effect on Oct. 1.

According to Thompson, HB 982 was written with the assistance of the Texas Entertainment Association (TEA), a trade group made up of strip-club owners, and she noted that the tax does not target nude dancing, which a Texas court has held to be a protected form of expression. Coincidentally, the TEA contributed $5,000 to Thompson's reelection campaign in the month before Election Day, and Thompson has admitted that this was the first time that she had accepted club owners' money.

It is not known, however, how many of the state's 175 strip clubs are members of the TEA, and it is likely that if any owner - or, indeed, any patron of strip clubs - were to challenge the bill in court, the fact that only adult businesses are affected by the tax, and that the majority of revenues from the tax would be received by the sexual assault program, even though no studies have proven that there is any relation between attending a strip club and sexually assaulting anyone, the tax would be struck down on First Amendment grounds.






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Mark Kernes

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