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Archive for Wednesday, October 19, 2005

Tax on sexually oriented businesses may pose constitutional concerns

October 19, 2005

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— Imposing a special tax on sex shops, strip clubs and sexually oriented businesses may sound like a good idea to some, but a legislative committee found out Tuesday there are some problems that make such a plan less likely than supporters want to admit.

The proposal, which could be a licensure tax on adult operations or an excise tax on the items they sell, is the brainchild of Phil Cosby of Abilene, who has been waging a battle for the past two years against adult stores around the state.

Legislative researchers estimated a 10 percent excise tax would generate about $1 million a year for the state.

Cosby told the Special Committee on Assessment and Taxation that there's a link between what adult stores sell and sex crimes, and that "this taxation is a new method to address this danger."

"They are causing the damage and they need to pay for the cleanup," Cosby said. "This helps to mitigate the negative effects on the community."

But John Ivan, a Shawnee Mission attorney representing three adult stores in Wichita, said the proposal is of questionable constitutionality because it could result in adult stores being taxed while other stores selling the same material wouldn't be taxed.

"The Kansas Legislature will not be able to prove any compelling state interest sufficient to justify the infringement upon constitutional rights," Ivan said.

He also said there's contradictory and inconclusive findings on the question of whether sexually oriented materials are tied to sex crimes.

"There's not a scintilla of evidence that the explicit nature of books and videos is the cause of this," Ivan said.

Rep. Sheri Weber, R-Harington, disagreed, saying, "As a matter of record, sexually explicit materials in different venues have an adverse affect on citizens in our state."

The committee's vice chairman, Rep. Kenny Wilk, said the hearing left him wondering about the best approach for legislators to take. He said the committee will meet next month to decide what - if any - proposal to recommend for the Legislature, which convenes Jan. 9.

"Clearly, it's a fine line we walk. The excise tax is challenging at best from a constitutional standpoint of how can you apply it equally," said Wilk, R-Lansing. "I don't know if you can apply an excise tax by location."

Wilk, chairman of the House Taxation Committee, said typically an excise tax is applied to a product, but that also would require stores to declare how much of the tax they collect.

"You are relying on self reporting, but I don't know how you would enforce that," Wilk said.

The idea isn't unique to Kansas. Utah in 2004 imposed a 10 percent tax on admission fees, sales, food and drinks at a sexually oriented business and a tax on escort services equal to 10 percent of the amount charged. The law has been challenged by clubs and escort services.

The Oklahoma House approved a similar proposal this year. It stalled in the Senate, but will be around for the 2006 session. In Missouri, a proposal for a $5 admission tax for sexually oriented businesses was introduced, but wasn't in the final version of legislation that banned nude dancing.

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