Texas Strip-Club Owners Pressured to Pay Nude Entertainment Tax

Texas wants strip-club owners to pay millions of dollars owed on a $5-per-patron tax imposed in 2007 that they have left unpaid amid court challenges, according to a letter from Comptroller Susan Combs.

Combs said in the April 11 letter that the clubs have to cough up the so-called pole tax even as the legal case continues, because courts have ruled it valid.

“There is no basis to withhold payment,” wrote Combs, a Republican who will finish her second term this year.

The tax, expected to generate about $30 million per year starting in 2008, was intended to fund sexual-assault programs such as prevention and services for victims, and other health-care initiatives. So far it has generated about $17.2 million, R.J. DeSilva, a spokesman for Combs, said in an e-mail.

“If the clubs had been paying it all along, they wouldn’t be in a bind now,” said Annette Burrhus-Clay, executive director of the Austin-based Texas Association Against Sexual Assault, which represents 80 rape-crisis centers. “Most patrons plan to spend more than $5 before they go into a club.”

Combs sent the letter to about 230 taxpayers, according to her office. Bradley Bryan, who represents the Texas Entertainment Association as a lobbyist, according to Texas Ethics Commission records, didn’t immediately respond to a phone call seeking comment.

The Texas Tribune first reported on the letter yesterday.

Legal Challenge

Under the Sexually Oriented Business Fee Act passed seven years ago, a business that offers live nude entertainment and alcohol must remit $5 to the comptroller for each patron. After lawmakers passed the legislation, owners of businesses led by the Texas Entertainment Association filed a lawsuit claiming the tax violated the First Amendment.

The state Supreme Court ruled in August 2011 that the tax didn’t harm the clubs’ freedom of speech. Clubs continued to fight the case in lower and appellate courts, but there has been no activity since April 2013, according to dockets.

G. Stewart Whitehead, a lawyer in the Austin office of the Winstead P.C. law firm who represents the Texas Entertainment Association, declined to comment on the appeal or collection of the tax.

DeSilva said the letter from the comptroller was standard practice.

“Our agency regularly sends notices or updates to taxpayers on various taxes and fees,” he said. “This particular notice was to remind business owners that the sexually oriented business fee is still in effect while litigation continues.”

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