AUSTIN, Texas (Legal Newsline) - The Texas Supreme Court ruled Friday that a statute requiring businesses that offer live nude entertainment to pay the state a fee for each customer admitted does not violate their right to freedom of speech.
In 2007, the state Legislature enacted the Sexually Oriented Business Fee Act. It states, "A fee is imposed on a sexually oriented business in an amount equal to $5 for each entry by each customer admitted to the business."
The fee is imposed on the business, not the customer, and the business is given discretion to determine the manner in which it derives the money required to pay the fee.
The first $25 million collected is to be credited to a sexual assault program fund and the balance is to be used to provide health insurance coverage for low-income people.
Amarillo strip club owner Karpod Inc. and the Texas Entertainment Association, which represents many of the state's topless clubs, sued the state Comptroller's Office and Attorney General's Office for declaratory and injunctive relief, asserting that the fee violates the free-speech guarantee of the First Amendment.
Following a bench trial, the trial court concluded that erotic nude/topless dancing is protected expression under the First Amendment and that the fee is a "content-based tax" on such expression.
The court also ruled that the State failed to and conceded it could not meet its burden under strict scrutiny to show that the tax is necessary to serve a compelling state interest and narrowly tailored for that purpose.
The trial court, in declaring the statute violates the First Amendment, permanently enjoined collection of the fee.
A divided court of appeals affirmed.
The state's high court, in its 20-page opinion, reversed the appeals court's judgment and remanded the case to the trial court. Justice Nathan L. Hecht authored the ruling.
"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," Hecht wrote.
While Karpod and TEA argue that the fee does nothing to reduce those secondary effects, "logic and the evidence indicate that the fee provides some discouragement to combining nude dancing with alcohol consumption," the Court said.
The fee, it said, is not a tax on unpopular speech but a restriction on combining nude dancing, "which unquestionably has secondary effects," with the "aggravating" influence of alcohol consumption.
"The fee in this case is clearly directed, not at expression in nude dancing, but at the secondary effects of nude dancing when alcohol is being consumed. An adult entertainment business can avoid the fee altogether simply by not allowing alcohol to be consumed," the Court wrote.
"For these reasons, we conclude that the fee is not intended to suppress expression in nude dancing."
Jerry Strickland, a spokesman for Texas Attorney General Greg Abbott, said last week's ruling is a victory for the state and, more importantly, victims of sexual assault.
"The Texas Supreme Court confirmed what we've said all along: the sexually oriented business fee is constitutional. Thanks to today's ruling, we are a step closer to freeing up millions of dollars for sexual assault prevention and crime victims' assistance," he said.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.