Utah Supreme Court rules strip club tax constitutional; escort tax isn't

The Utah Supreme Court has ruled that a state tax imposed on strip clubs is constitutional. Its imposition on companies offering escort services, however, is unconstitutional.

In a ruling issued Friday, Associate Chief Justice Matthew B. Durrant wrote that the state's Sexually Explicit Business and Escort Service Tax is "content-neutral," and therefore puts minimal burdens on constitutionally-protected expression.

"In this case, the tax is triggered by nudity, which the (U.S.) Supreme Court has specifically declared 'is not an inherently expressive condition,'" Durrant wrote in the majority opinion. "We find nothing in the record before us — either (in) the tax's legislative history or in the text of the tax itself — establishing that the tax was enacted with the predominant purpose of suppressing protected expression."

While nudity is not considered protected expression, the U.S. Supreme Court has held that nude dancing is a form of protected expression that occupies "the outer ambit" of the First Amendment. In 2004, a group of erotic dance clubs and escort services filed a lawsuit against the Utah State Tax Commission, claiming that the tax violates their First Amendment right to freedom of speech and their Fourteenth Amendment right to equal protection under the law.

The tax was created by the Legislature in 2004. It assesses a 10-percent tax on admission fees and user fees charged by sexually explicit Utah businesses, those that employ nudity for more than 30 days per calendar year. Utah-produced retail merchandise, food and drinks sold by these businesses are also subject to the tax.

Money generated by the tax is used by the Utah Department of Corrections to help pay for sex offender treatment for indigent inmates, and by the Utah Attorney General's Office to help fund its Internet Crimes Against Children Task Force.

Durrant cited the use of the tax revenue for an "unrelated government interest" — sex offender treatment and investigating Internet crimes against children — as further evidence of the tax's constitutionality. He also pointed to the fact that the legislative language that created the tax was "narrowly tailored."

However, the court ruled, the legislation's definition of escort services is too broad and therefore unconstitutional.

"The tax defines an 'escort' as anyone who accompanies another for compensated companionship," Durrant wrote, noting that it does not define an escort in terms of nudity or define companionship.

"Therefore, according to the plain terms of the statute, individuals who are paid for providing care for the elderly as well as those who are paid as tour guides would fall within the definition of an 'escort,' and any person or business who employs them would be subject to the tax."

Chief Justice Christine Durham agreed that the tax's application to escort services is unconstitutional, but disagreed with the majority opinion concerning its application to strip clubs.

"The tax, by its terms, targets sexually explicit businesses that feature, for 30 or more days per year, the constitutionally protected expressive activity of nude dancing," Durham wrote in her dissenting opinion. "Because it does so, I would hold that the tax is content-based and thus subject to strict scrutiny."

Based on such scrutiny alone, Durham wrote, the tax is unconstitutional as a whole.

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