Texas House OKs 10% Tax on Sexually Oriented Businesses

AUSTIN, Texas — Texas legislators have given a green light for a new tax on sexually oriented businesses that would replace a measure that taxes patrons entering strip clubs.

Under H.B. 982, a $5-per-person gentlemen's club fee would be repealed and replaced with a 10 percent tax to those sexually oriented businesses that charge an admission fee.

The bill, introduced by Rep. Senfronia Thompson and endorsed by the adult entertainment industry, passed the House on Thursday.

“This bill is unlike the $5 admission tax that has been tied up in the courts since the last legislative session,” Thompson told XBIZ. “The free-speech issue that has dogged that one has been eliminated with this bill. We are charging a tax, in this case, to do business in the state of Texas.”

Thompson noted the proposed "occupation tax" does not target nude dancing, a form of expression a Texas court ruled is protected by the First Amendment.

She said that the bill was hammered out with the help of members of the Texas Entertainment Association, which is an industry trade association for Texas strip-club owners. She noted that there are 115 known strip clubs in the state.

The bill's target is strip clubs, but it could be expanded to other sectors. H.B. 982 defines sexually oriented businesses to include any “commercial enterprise selling, renting or exhibiting items [and services] intended to provide sexual stimulation or sexual gratification to the customer.”

The $5-per-person gentlemen's club tax that signed into law in 2007 was intended to fund sexual assault services in 54 Texas counties and health insurance programs. Last year, a judge struck down the law, saying that topless dancing was protected as free speech and that the state couldn't show a link between strip clubs and inadequate health insurance.

Last month, the state Comptroller's Office said it was holding $11.2 million in fees collected from strip club patrons pending the action of an appeals court on the per-person tax.

Strip owners who have paid the state under the old fee would get a credit toward the new tax, which would go into effect as early as July 1.

A recent University of Texas study estimated Thompson’s 10 percent admissions tax would raise between $500,000 and $1.2 million. Thompson said that number is low, and that her bill would raise between $4 million and $6 million annually.

Thompson said that the bill has moved on to a fast track in the Legislature and could be signed into law by the governor within weeks.