Texas Appeals Court Strikes $5 Gentlemen’s Club Tax

Jun 6, 2009 12:15 AM PST
AUSTIN, Texas — A Texas Court of Appeals panel upheld on Friday a lower court ruling striking down a tax that imposed a $5 tariff for each customer entering a sexually oriented business, or SOB.

On appeal, Texas Comptroller Susan Combs argued that the SOB tax does not violate the 1st Amendment, that the SOB tax does not violate 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.

Having found the SOB tax unconstitutional under the 1st Amendment, the court said it need not reach the comptroller's second issue regarding appellee Karpod Inc.’s and Texas Entertainment Association's state constitutional claims.

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

“We affirm the trial court's judgment declaring that subchapter B of chapter 47 of the business and commerce code is unconstitutional and permanently enjoining assessment and collection of the tax,” the court ruled.

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

More Adult Industry News »
About / Contact