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Court rules $5-per-patron tax at strip clubs legal

AUSTIN, Texas (AP) — A $5-per-customer tax at Texas strip clubs is legal, a state appeals court has ruled.

A three-judge panel of the Austin-based 3rd Court of Appeals on Friday rejected arguments from attorneys for strip club owners who argued it was an improper occupation tax and unconstitutional. The law affects more than 200 clubs that offer nude entertainment and sell alcohol or allow the customers to bring in their own alcohol.

What has become known as the "pole tax" was passed by Texas lawmakers in 2007. The law earmarks the first $25 million of the tax every two years to a sexual assault prevention program.

The ruling Friday can be appealed to the Texas Supreme Court, although attorneys for club owners have not indicated whether they will do so.

The Texas high court already has upheld the law once, ruling in 2011 that the fee doesn't violate the U.S. Constitution's protection for free expression.

In this latest appeal, the Texas Entertainment Association argued the tax was an improper occupation tax. The appeals court ruling characterized it as a proper excise tax.

The appeals court also rejected claims the tax unconstitutionally targeted nude entertainment businesses that had two or more customers, and improperly excluded other erotic businesses like lingerie modeling studios or movie arcades that typically cater to an individual patron.

According to the ruling written by Appeals Justice Scott Field, the Texas Supreme Court upheld the fee because it "was imposed to address the adverse secondary effects of combining nude entertainment with alcohol consumption, both by discouraging the activity through higher taxation and by generating revenue for programs designed to address the social harms that result."

Some club owners have been collecting the fee. Others have not, waiting until the court challenges are resolved.

State Comptroller Susan Combs last month sent letters to strip clubs asking them pay up, even though the court appeal was pending.

State figures show about $17 million has been collected and kept in an account while the issue is in the courts. The total, however, is short of the $44 million that had been anticipated.
 

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