Home » News » Clothing rule in tax on adult businesses violates First Amendment, 5th Circuit holds

By David L. Hudson Jr., published on December 31, 1969

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The Texas comptroller violated the First Amendment by applying the state’s tax on sexually oriented businesses to those businesses whose dancers wear latex coverings over their breasts, a federal appeals court has ruled.

The 5th U.S. Circuit Court of Appeals said the comptroller engaged in content discrimination on expressive speech and could not justify the law on the basis of the secondary-effects doctrine. 

In 2007, the Texas Legislature passed a law requiring businesses that feature nude dancing and serve alcohol to pay a $5-per-customer tax.   The law defined nudity as “without clothing.” In response to the law, many adult businesses had their dancers wear shorts and latex coverings over their breasts. These businesses were dubbed “latex clubs” for their efforts at avoiding the tax.

However, in January 2017, the Texas comptroller promulgated the clothing rule, amending the clothing rule for nude dancers to exclude “[p]aint, latex, wax, gel, foam, film, coatings, and other substances applied to the body in a liquid or semi-liquid state.” This change in the law made the “latex clubs” subject to the tax.

As a result, the Texas Entertainment Association sued in federal court, alleging a violation of the First Amendment, due process, and equal protection. A federal district court largely ruled in TEA’s favor, and the comptroller appealed.

On appeal, a three-judge panel of the 5th Circuit ruled in Texas Entertainment Association v. Hegar that the clothing rule did violate the First Amendment.

The panel first analyzed whether the rule was content-based or content-neutral. The difference is extremely important in First Amendment cases, because content-based laws are subject to a higher form of judicial review known as strict scrutiny, while content-neutral laws are subject to a lesser standard known as intermediate scrutiny.

The comptroller argued that the rule was content-neutral, because it was designed to reduce the secondary effects of such dancing — such as increased crime or decreased property values. The secondary-effects doctrine is often used by government officials to justify restrictions on adult businesses.

But the 5th Circuit reasoned that the comptroller produced no evidence that the state was concerned with secondary effects in amending its clothing rule. The panel wrote that “the Comptroller offered no evidence to show that he even considered the data linking the [sexually oriented business fee] with adverse secondary effects produced by nude dancing when promulgating the Clothing Rule.” 

Thus the 5th Circuit deemed the clothing rule content-based and this finding doomed it.

“The Comptroller does not present an argument that the Clothing Rule satisfies this high burden, leaving us no cause to disagree with the district court’s conclusion that the Clothing Rule fails strict scrutiny under the First Amendment,” the panel concluded.

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David L. Hudson Jr. is a professor at Belmont University College of Law who writes and speaks regularly on First Amendment issues. He is the author of Let the Students Speak: A History of the Fight for Free Expression in American Schools (Beacon Press, 2011), and of First Amendment: Freedom of Speech(2012). Hudson is also the author of a 12-part lecture series, Freedom of Speech: Understanding the First Amendment (2018), and a 24-part lecture series, The American Constitution 101 (2019). 


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