Texas Appeals Court Strikes $5 Gentlemen's Club Tax

AUSTIN, Texas — A Texas Court of Appeals panel upheld on Friday a lower court ruling striking down a tax that imposed a $5 tariff for each customer entering a sexually oriented business, or SOB.

On appeal, Texas Comptroller Susan Combs argued that the SOB tax does not violate the 1st Amendment, that the SOB tax does not violate the Texas Constitution, that sovereign immunity bars suit by the Texas Entertainment Association and that the trial court erred in awarding attorneys fees.

But the appeals court judges had concern over a tax that was a "content-based speech regulation" and subjected to the "strict scrutiny" required to determine if the regulation were narrowly tailored to serve a compelling governmental interest.

“Evidence that the SOB tax is aimed at reducing secondary effects of sexually oriented businesses does not preclude the proper application of strict scrutiny in this case,” the court ruled.

Having found the SOB tax unconstitutional under the 1st Amendment, the court said it need not reach the comptroller's second issue regarding appellee Karpod Inc.’s and Texas Entertainment Association's state constitutional claims.

In addition, the court overruled the sovereign immunity and attorneys fees claims by the Texas comptroller.

“We affirm the trial court's judgment declaring that subchapter B of chapter 47 of the business and commerce code is unconstitutional and permanently enjoining assessment and collection of the tax,” the court ruled.

At post time, it wasn’t clear whether the comptroller will appeal the decision to the Texas Supreme Court.

Related:  

Copyright © 2025 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Xgen's Dr. Mindy DeSeta Spotlighted on CBS News

CBS News has spotlighted Xgen Products resident sex therapist Dr. Mindy DeSeta on its Miami and West Palm Beach affiliate stations.

FSC Unpacks SCOTUS Age Verification Ruling in Webinar

The Free Speech Coalition conducted a public webinar Tuesday to help adult industry stakeholders understand the Supreme Court’s recent decision in FSC v. Paxton, and its potential implications.

Electric Novelties Expands 'Gläs' Collection

Electric Novelties has introduced a variety of new items from its Gläs collection.

UK Lawmaker Calls for Appointment of 'Porn Minister'

Baroness Gabrielle Bertin, the Conservative member of Parliament who recently convened a new anti-pornography task force, is calling for the appointment of a “minister for porn,” according to British news outlet The Guardian.

FSC Toasts Jeffrey Douglas for 30 Years of Service

n the very same evening when the adult industry was hit hard by the Supreme Court ruling supporting Texas’ controversial age verification law, HB 1181, members of the Free Speech Coalition board, staff and supporters gathered to celebrate Jeffrey Douglas’ 30 years as board chair — a fitting reflection of his reputation as an eternal optimist.

FSC: Age-Verification Laws Go Into Effect South Dakota, Georgia, Wyoming on July 1

The Free Speech Coalition (FSC) has published a statement regarding new age verification laws set to go into effect tomorrow in South Dakota, Georgia, and Wyoming.

FSC Responds to Supreme Court Decision on Texas AV Law

The Free Speech Coalition (FSC) has released a statement responding to last week's Supreme Court decision on FSC v. Paxton, the Texas age verification law.

Le Wand's 'Petite' Highlighted in NY Magazine Article

Le Wand’s Petite massage wand has been recognized in NY Magazine's The Strategist round-up of top-rated massagers.

UPDATED: Supreme Court Rules Against Adult Industry in Pivotal Texas AV Case

The U.S. Supreme Court on Friday issued its decision in Free Speech Coalition v. Paxton, striking a blow against the online adult industry by ruling in support of Texas’ controversial age verification law, HB 1181.

North Carolina Passes Extreme Bill Targeting Adult Sites

The North Carolina state legislature this week ratified a bill that would impose new regulations that industry observers have warned could push adult websites and platforms to ban most adult creators and content.

Show More