Tax News

CCH (cch.taxgroup.com) reports:

  A Texas Court of Appeals has upheld a district court's ruling that the state's $5-per-customer admission tax imposed on sexually oriented businesses violated the First Amendment to the U.S. Constitution and was therefore invalid. Applying a strict scrutiny analysis, the court held that the tax was a content-based tax that the Texas Comptroller failed to show was necessary to serve a compelling state interest.

  The Comptroller conceded that the tax could not survive a strict scrutiny analysis and argued instead that the tax was content-neutral and therefore subject to intermediate scrutiny. However, even under an intermediate-scrutiny standard, the tax would fail constitutional muster because it was not narrowly tailored to further a substantial governmental interest.