BILL ANALYSIS

H.B. 982

By: Thompson

Licensing & Administrative Procedures

Committee Report (Amended)

BACKGROUND AND PURPOSE

The 80th Legislature, Regular Session, 2007, enacted H.B. 1751, imposing an admissions fee on sexually oriented businesses that provide live nude entertainment and allow on-premises consumption of alcoholic beverages.  Under H.B. 1751, the revenue generated by the admissions fee is allocated to the sexual assault program fund and the Texas health opportunity pool. Subsequent to the passage of H.B. 1751, a lawsuit was filed in state district court challenging the constitutionality of the legislation.  In March 2008, the District Court of the 345th Judicial District in Travis County held that the part of the Texas Business & Commerce Code that included the provisions that imposed the admissions fee violated the First Amendment to the United States Constitution and was therefore invalid.  The comptroller of public accounts and the attorney general have appealed this ruling to the Third Court of Appeals.  Pending the outcome of the appeal, the comptroller continues to collect the admissions fee, but no revenue has been distributed to the sexual assault program fund or the Texas health opportunity pool. 

To address the constitutional issues raised in the lawsuit, H.B. 982 repeals Subchapter B, Chapter 47, Business & Commerce Code, and implements an occupation tax on the gross receipts from admissions fees charged by all sexually oriented businesses.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 982 amends the Tax Code to impose an occupation tax on each sexually oriented business that charges an admissions fee. The bill sets the rate of the tax at 10 percent of the gross receipts received by the sexually oriented business from admissions fees. The bill defines "sexually oriented business" to include a sex parlor, nude studio, modeling studio, love parlor, adult bookstore, adult movie theater, adult video arcade, adult movie arcade, adult video store, adult motel, or other commercial enterprise the primary business of which is the offering of a service or the selling, renting, or exhibiting of devices or any other items intended to provide sexual stimulation or sexual gratification to the customer.  The bill repeals provisions of the Business & Commerce Code, enacted in 2007, that impose a fee on a sexually oriented business defined differently to mean a nightclub, bar, restaurant, or similar commercial enterprise that allows on-premises consumption of alcoholic beverages and that provides, for an audience of two or more individuals, live nude entertainment or live nude performances. The bill, with respect to a business that has paid a fee under the repealed law before its repeal, entitles the business to a credit against the admissions tax in an amount equal to the amount of the fee paid. The bill limits the total credit claimed on a tax report to the amount of tax due for the report. The bill authorizes a person eligible for a credit that exceeds such a limitation to carry the credit forward for subsequent reporting periods.

H.B. 982 sets the due date for the sexually oriented businesses admissions tax to be on or before the last day of the first month following the end of each calendar quarter. The bill requires a person who is required to pay the tax to file a tax report with the comptroller of public accounts on a form prescribed by the comptroller. The bill requires the report to include a statement of the gross receipts received from admissions fees during the preceding quarterly period and any other information required by the comptroller. The bill requires a person on whom the tax is imposed to keep a record of the gross receipts received each day from admissions fees, and any other information required by the comptroller. The bill defines "admissions fee" to mean a fee imposed on a customer for admission into any portion of the premises of a sexually oriented business.

H.B. 982 imposes a penalty of five percent of the amount of the tax due for failure to file a report or pay the tax, and a penalty of an additional five percent if a person fails to file the report or pay the tax within 30 days after the day on which the tax or report is due. The bill specifies that the minimum penalty is one dollar.

H.B. 982 allocates one-fourth of the net revenue from the sexually oriented businesses admissions tax to the foundation school fund and three-fourths to the general revenue fund. The bill requires the comptroller to transfer to the sexual assault program fund the first $25 million of such net revenue collected from the tax that is allocated to the general revenue fund in any state fiscal biennium.

H.B. 982 amends the Government Code to add revenue from the sexually oriented businesses admissions tax to the other funding that comprises the sexual assault program fund and to make a conforming change removing the funding that derives from the repealed fee.

H.B. 982 repeals Subchapter B, Chapter 47, Business & Commerce Code, as added by Section 3, Chapter 1206 (H.B. 1751), Acts of the 80th Legislature, Regular Session, 2007.

EFFECTIVE DATE

July 1, 2009, or, if the act does not receive the necessary vote, the act takes effect October 1, 2009.

EXPLANATION OF AMENDMENTS

Committee Amendment No. 1:

H.B. 982 is amended to remove the provision requiring the comptroller of public accounts to transfer to the sexual assault program fund the first $25 million of net revenue collected under the sexually oriented businesses admissions tax that is allocated to the general revenue fund, leaving the bill to require the comptroller to transfer to the sexual assault program fund the net revenue collected under the tax that is allocated to the general revenue fund.