When state or local governments pass taxes on certain businesses or goods, and those taxes are challenged in courts, it may not mean businesses and individuals are exempt from paying in the meantime. A tax levied in 2007 against Texas strip clubs has been the subject of an ongoing court battle in ensuing years, and numerous businesses have opted not to pay the tax, which they call unfair. Recently, the Texas Comptroller sent out letters to around 200 clubs requiring them to pay the fees accumulated under the tax law.
The tax is a $5 fee for every patron; reportedly, the state expected $44 million in funds from the tax. The funds were earmarked for health care and programs to assist victims of sexual assault. According to reports, the state has only collected around $14 million in taxes.
Originally, strip club owners and others in adult entertainment filed claims that the tax, which many are calling the “pole tax,” was a violation of the First Amendment. The court ruled that the tax didn’t impede free speech. Now, a case is pending in an appeals court that claims the tax is unconstitutional because of the way the fees are used.
The state says that a court case is no excuse for not paying taxes that are currently owed. However, paying the large back taxes could result in many of the strip clubs going out of business. One attorney for the strip clubs questioned why the comptroller’s office sent the letters. A spokesman for the comptroller’s office said that sending reminders or notices of fees and taxes due is a regular procedure for the office.
Source: Star Telegram, “Texas comptroller warns strip clubs to pay “pole tax”” Terri Langford, May. 08, 2014