Extras on Excise: Strip Clubs Swing and Miss - Stripper Taxes Survive State Court Challenges

Taxes imposed on live adult entertainment such as nude dancing have withstood First Amendment challenges in Nevada and Texas. Opponents of the tax argue that it unfairly discriminates against adult content and suppresses free speech. But state courts remain unpersuaded.

The ruling in Nevada arose after a group of adult entertainment businesses argued that the tax violated free speech rights under the Nevada and federal constitutions.

The Nevada live entertainment tax (NLET) imposes an excise tax on admission to any facility where live entertainment is provided as well as on merchandise, food and refreshments sold at the event. The statute was enacted in 2003, and in subsequent years the Nevada Legislature enacted exemptions for outdoor concerts at non-gaming establishments, NASCAR race events and professional minor league baseball contests. The businesses filed suit in 2006, convinced that the tax was discriminatory and a violation of their right to express or facilitate the expression of live nude dancing.        

After a flurry of filings, dismissals and appeals, mainly of the procedural variety, the case arrived at the Nevada Supreme Court. The businesses argued that NLET discriminates based on the content of taxpayer speech, targets a small group of speakers and threatens to suppress speech. Unfortunately for the businesses, the state’s highest court disagreed with each point.

The court determined that the statute’s language does not address the content of any taxpayer’s message. Further, the court concluded that the excise tax is not a burden on the expression of live nude dancing at live adult-entertainment facilities and noted that a variety of live entertainment establishments are subject to NLET.

The court’s decision was not unexpected. NLET is a broad-based tax covering live musical performances, dancing, acrobatic and magic shows, sporting events and more. Additionally, the statute does not specifically address live nude dancing. Despite the exemptions to the tax, it generally applies at places where there is live entertainment – whether that entertainment is dancers on a pole or performers in a stage play.

Like Nevada, Texas has also faced protracted litigation from adult entertainment businesses over its so-called “pole tax,” officially named the sexually oriented business fee. In 2011, the state withstood a first amendment challenge from an adult industry lobbying organization only to face another constitutional challenge brought by the same group. The result in the later challenge was the same, as the Third Court of Appeals upheld the tax earlier this year. 

In contrast to Nevada, Texas courts have acknowledged that the primary purpose of the fee is to discourage the business of live nude entertainment, making it akin to a “sin tax”. Despite this, the adult entertainment businesses in Texas can blame their first amendment loss on the alcohol. Because the fee only applies where the businesses allow alcohol on the premises, the Texas Supreme Court was able to conclude that the fee is not intended to suppress expression of nude dancing…Even though it is.

The importance of protecting the expressive conduct of nude dancing has been debated extensively in U.S. courts. Unfortunately for adult entertainment businesses seeking relief from arguably content-based excise taxes, the consensus has been that society cares, but only a little.

By Jequetta Byrd 

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should more states institute "pole taxes" or are they an unfair burden on an industry with minimal protection under the law?

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