2017 EXPO | August 27-30

Sin Taxes 2015

EXPO 2015 To Tackle the Resurrection of
 Sin Taxes

sin-tax-girlThe sin tax or pole tax—where adult nightclubs have to pay a special tax because, well, they’re adult nightclubs—has been rearing its ugly head of late. Texas, Illinois and Nevada have already dealt with, or are still fighting over, these special taxes, and just recently both Georgia and Florida have come into legislator’s crosshairs.
At the EXPO 2015 Legal Panel, our speakers, including First Amendment attorneys Brad Shafer and Danny Aaronson, and Jeff Levy, Executive Director of Statewide Association Chapters in Pennsylvania, New Jersey and New York, will update attendees on the sin/pole tax situation in those five states and also give tips on preemptive measures that can be taken to hopefully keep your state from passing similar taxes.
For now, here’s a look at what’s happening in these states:

GEORGIA:  Under a measure before the Georgia Senate, adult entertainment establishments would be required to pay 1 percent of their profits, or $5,000 annually, into a fund for those who have been sexually exploited. The fund would pay for the care, housing and other services for those victims. A Georgia Senate committee said yes to the measure after hearing from a child sex trafficking survivor. The bill has support from religious leaders, Georgia Bureau of Investigation Director Vernon Keenan and advocates.

Language in the bill attempts to connect “adult entertainment establishments that provide to their patrons performances and interaction involving various forms of nudity” to prostitution and sexual exploitation of children.

The legislation would also set up an additional $2,500 fine that would be imposed for those convicted of sex trafficking. Money from the fines would also go into the fund. No word yet if online ads, hotels or massage parlors will also be taxed, as according to the advocacy group Polaris, there were more sex trafficking calls in 2014 as a result of those Georgia industries, while strip clubs didn’t even make the top 10.

Adult industry attorney Lawrence Walters of Walters Law Group in Longwood, Fla., told XBIZ  that the Georgia bill represents a “sin tax” and that the war on human trafficking has become “the war on porn, rebranded.”

FLORIDA: Florida is following Georgia by introducing a strip club $10 per patron fee—and an insane requirement that patrons’ names be recorded—with those sin tax fees used to fight human trafficking.

The Florida House Finance & Tax Committee agreed in February to advance this “sin tax” bill out of the committee. The measure would impose entry requirements on adult establishments, including a $10 fee on top of any other existing admission charges. Also, it would require the business to keep records of customers by “taking names.” Yes, you read that right. No estimates were available on the amount of revenue that could be collected from this “sin tax” proposal.

“Should the resources that go to rehabilitate victims of human trafficking come from all 19 million Floridians,” Committee Chairman Matt Gaetz, R-Fort Walton Beach asked, “or should people who frequent adult-entertainment establishments, which have become a focal point for that illicit trade, pay a disproportionate share to help rehabilitate victims?”

The proposal has yet to make its way to the Senate. Anticipating opposition because the measure would hurt businesses, House Finance & Tax Committee members said they need to carefully define a strip club surcharge.
Rep. Charles Van Zant, R-Keystone Heights, said the surcharge should be $10 on nightclubs, “where you do not have human nudity,” and $25 “on those who do.” Van Zant added that because of connections between adult entertainment and human trafficking, the state should collect names.

According to Polaris, Florida had hundreds of calls to its center in 2014 to report suspected incidents of human trafficking. The top three industries? 1) Hotel/motel 2) Online ads, and 3) Restaurants. The adult entertainment industry didn’t even make the top 10.
Sin-Pole-Tax-art
TEXAS:  A $5-per-patron “pole tax” fee is not an unconstitutional occupation tax and must be paid by Texas strip clubs that serve alcohol, the Texas Third Court of Appeals ruled in 2014 (in 2012, the U.S. Supreme Court refused a request to hear the case). Strip clubs have fought the Sexually-Oriented Business Fee, almost from the time the Texas Legislature passed it, in 2007. Money from the fee is going to programs for sexual assault victims and to health care.

Shortly after the law was enacted, some clubs paid the fee, then stopped as legal challenges began. About $14 million has been collected so far. But if the clubs put a halt to further legal challenges, they would have to start paying the fee retroactively, totaling millions of dollars. Some clubs could close altogether. Club owners, through the Texas Entertainment Association, raised three issues in their appeal:

First, the strip club association claimed the fee was really an unconstitutional occupational tax because it failed to designate 25 percent of the collected money for public education. Second, the group claimed it is unfair because it targets only businesses that provide live nude entertainment, and third, it said the fee is an impediment to free speech.

The Texas Supreme Court has already ruled the clubs could avoid paying the fee if they stopped serving alcohol. Because the fee is only charged on clubs featuring live nude entertainment, the appeals court decided “the tax is not based on the value of operating a nude-entertainment business in Texas.”

NEVADA:  The Nevada Supreme Court recently held that the 2004 Live Entertainment Tax (LET) does not constitute a violation of strip clubs’ rights to freedom of speech under the First Amendment. While the plaintiffs, comprising a group of Nevada strip clubs, claimed the excise tax was discriminatory in nature, the court—despite the numerous exemptions provided to other sub-industries in the live entertainment space—ruled it constitutional.

If the occupancy capacity of the facility hosting the event is less than 7500, the applicable tax rate is 10 percent, versus five percent if the capacity is greater than or equal to 7500. Numerous exemptions granted to sub-industries in the live entertainment sector make the tax no longer broad-based, specifically targeting adult entertainment.

ILLINOIS:  According to the Illinois Department of Revenue, the so-called “pole tax” on Illinois strip clubs raised about $380,000 in 2013 to help fund rape crisis centers around the state. The Sexual Assault Services and Prevention Fund was created as a way to offset declining state support for rape crisis centers. The amount collected was far short of the $1 million that backers said the new tax would bring in when they pushed it through the General Assembly in 2012. Under the law, strip club operators pay a surcharge to the state based on their size and revenue. Operators also can opt to pay a flat $3 surcharge for each patron. Revenue Department spokeswoman Sue Hofer said 37 companies paid into the fund, meaning each club paid an average of about $10,000 toward the tax in 2013.

SOME GOOD NEWS!  EXPO 2015 Panelist Jeff Levy reports he has defeated pole taxes seven times in the past several years. “I defeated a pole tax in Pennsylvania three times, in New York three times and in New Jersey once,” says Levy. “The key, at least for me, has been to make sure that the pole tax never makes it out of committee. Once it’s out of committee, gets voted and becomes a bill, you’re in trouble. It’s a lot harder to fight a tax when it becomes law. But I have some secret weapons in my arsenal on how to beat these things!”

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