From Deseret News archives:
Strip clubs, escort service set to renew legal battle over tax
Many clubs and escort services have gotten away with not charging the 10 percent tax amid lax state enforcement, and objections to the tax are now headed back to a state district court.
Sex-industry lobbyist and lawyer Andrew McCullough said Thursday he was renewing a legal battle by filing a motion for a preliminary injunction against the cover-charge tax.
McCullough said one of his clients, the strip club American Bush, has been paying the tax in order to challenge it, but that many other clubs in Utah are refusing to collect it.
McCullough said he doesn't know of any escort service that's adding the tax to customers' bills. The tax is in addition to the income and sales taxes the businesses already pay.
The tax was supposed to raise $1 million a year for treatment of sex offenders, but the first year's take was less than $5,000, said Tax Commissioner Palmer DePaulis.
"We have not been pressing this until we get done with the litigation," DePaulis said Thursday.
Originally a state judge ruled McCullough's suit was out of his jurisdiction and a matter for the Tax Commission to adjudicate. But the industry's appeal to the Utah Court of Appeals bounced the case back to 3rd District Judge Tyrone Medley for resolution.
McCullough plans to file his motion with Medley as early as Friday, renewing the suit by Salt Lake County strip clubs the Crazy Goat Saloon, Northern Exposure, Southern Exposure, American Bush, Trails and Trails II. Joining them was Companions Escorts.
Some Utah legislators didn't want to tax an industry they said they couldn't condone — one called it "dirty money." And it wasn't one of Utah's socially conservative Republicans who sponsored the tax, it was a Democrat.
The sponsor, Rep. Duane Bourdeaux, D-Salt Lake City, disclosed a conflict of interest as executive director of the Center for Family Development, which treats sex offenders at prison halfway houses. Bourdeaux said he expected to benefit from some of the tax proceeds.
Bourdeaux defended the tax by saying the state had a compelling interest in fighting the "secondary" effects that strip clubs have on customers.
Legislative attorneys warned that singling out strip clubs and escort businesses with a special tax could land the state in court accused of violating the Constitution's equal protection clause or the First Amendment.
