Stripper Tax Ruling Reversed

The legal challenge of the so-called "titty tax" – Texas' infamous $5-per-head surcharge on strip bars – has left one court but is likely headed straight back to another. On Aug. 26, the Texas Supreme Court ruled against the argument by the Texas Entertainment Association Inc. and bar owners Karpod Inc. that the fee levied at nude bars serving alcohol is unconstitutional. Now the strip clubs have two options: Take the case back to the lower courts as an argument about state taxes, or push it to the U.S. Supreme Court as a free-speech issue.

A little history: In March 2008, Travis County District Judge Scott Jenkins ruled that, as a tax on topless dancing, the surcharge was a violation of the First Amendment of the U.S. Constitution. The 3rd Court of Appeals upheld the decision in 2009 but now, more than a year after hearing the latest state's appeal, the Texas Supreme Court has overturned it. Delivering the opinion, Justice Nathan Hecht wrote, "The fee is not aimed at any expressive content of nude dancing but at the secondary effects of the expression in the presence of alcohol." But don't expect to see the $15 million raised by the surcharge so far (well under the predicted $40 million a year) to go toward support services for victims of sexual assault. The opinion remands the case back to Jenkins' court "to consider issues raised by respondents under the Texas Con­stitution," so the cash will remain in a holding account. Stewart White­head, attorney for the Texas Entertainment Associa­tion and Karpod, said, "The Texas Constitution provides that a fourth of all revenue generated by occupation taxes has to go to Texas public schools, and this very clearly does not."

Whitehead's clients could also still appeal this latest ruling to the nation's highest court, but they have further avenues as well. In his original decision (see "Topless Tax Termin­at­ed," April 4, 2008), Jenkins wrote that the surcharge "must be reviewed as a content-based tax" and therefore was a clear First Amend­ment violation on that one area alone. However, he did not address the fact that, if applied as written, the bill would hit not just strip joints but also any place serving alcohol in the presence of even partial nudity, from avant-garde theatre to fashion shows. This means Whitehead's clients could also challenge it on grounds of unequal application, and, he said, "We're still mulling over those options right now." So expect to see the surcharge in at least one court near you – or in D.C. – sometime soon.