In Utah, It’s Yes to Taxing Strip Clubs & No to Taxing Escort Agencies

In an early holiday gift to escort service agencies in Utah, the Supreme Court upheld in a majority opinion the state’s Sexually Explicit Business and Escort Service Tax statute insofar as it relates to the imposition of said tax on erotic dance clubs but not on escort service agencies, decided in terms of First Amendment analysis.

The case, Bushco v. Utah State Tax Commission, Utah Supreme Court, No. 20070559 (decided November 20, 2009), pitted various strip clubs and escort agencies against the Utah State Tax Commission over the law, which has since 2004 imposed a substantial tax – namely 10% on all gross receipts from businesses that feature “any nude or partially denuded individual for 30 days or more per year (or if said person would wear “G-strings and pasties,” according to the law), or provide companionship to another individual in exchange for compensation.” Tax collections of this sort have been delegated to providing treatment for Utah’s convicted sex offenders.

In the 4-1 decision, the state Supreme Court held the statute to be unreasonably vague in terms of escort service providers (no tax) and acceptably content-neutral in terms of expression, namely strip clubs (would continue to be taxed).

Applying the four-part U.S. Supreme Court intermediate scrutiny analysis, the state Supreme Court deemed the regulation of conduct (nude dancing and such) to be constitutionally permissive. [For in-depth legal analysis, please feel free to email me, but I’m trying not to over-tax readers’ brains on this Monday following the long Thanksgiving holiday.]

It also found the legislation to not be unconstitutionally overbroad because it refrains from prohibiting a substantial amount of protected expression and that it is directed towards a means of expression rather than expression itself. And as pertains to escort services, the law was written too vaguely because it does not provide a person of ordinary intelligence a reasonable opportunity to understand what is prohibited – namely, “escort” could be any compensated companion, including a caregiver for the elderly, tour guides, and perhaps even a babysitter.

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