Bushco v. Utah State Tax Com'n

• Decision Date: 20 November 2009
• Docket Number: No. 20070559.,20070559.
• Citation: 2009 UT 73,225 P.3d 153
• Parties: BUSHCO, dba Babydolls Escorts; Valley Recreation, Inc. dba Kitty's Escorts and Angel's Escorts; The D. House, LLC dba The Doll House, Plaintiffs and Appellants, v. UTAH STATE TAX COMMISSION; Pam Hendrickson, R. Bruce Johnson, D'Arcy Dixon Pignanelli, and Mark B. Johnson (in their official capacities as members of the Utah State Tax Commission), Defendants and Appellees.
• Court: Utah Supreme Court

225 P.3d 153

2009 UT 73

BUSHCO, dba Babydolls Escorts; Valley Recreation, Inc. dba Kitty's Escorts and Angel's Escorts; The D. House, LLC dba The Doll House, Plaintiffs and Appellants, v.UTAH STATE TAX COMMISSION; Pam Hendrickson, R. Bruce Johnson, D'Arcy Dixon Pignanelli, and Mark B. Johnson (in their official capacities as members of the Utah State Tax Commission), Defendants and Appellees.

No. 20070559.

Supreme Court of Utah.

November 20, 2009.

Rehearing Denied February 2, 2010.

W. Andrew McCullough, Midvale, for plaintiffs.

Susan L. Barnum, Nancy L. Kemp, Salt Lake City, for defendantUtah State Tax Commission.

Nancy L. Kemp, Salt Lake City, for defendantsPam Hendrickson, R. Bruce Johnson, D'Arcy Dixon Pignanelli, and Mark B. Johnson.

Marina Baginsky Lowe, Salt Lake City, for amicus curiae ACLU Foundation of Utah.

INTRODUCTION

DURRANT, Associate Chief Justice:

¶ 1 In 2004, the Utah legislature enacted the Sexually Explicit Business and Escort Service Tax¹(the "Tax"), which imposes a 10 percent gross receipts tax on businesses whose employees or independent contractors (1) perform services while nude or partially nude for 30 days or more per year, or (2) provide companionship to another individual in exchange for compensation.The revenue generated by the Tax helps fund treatment programs for convicted sex offenders and investigations of internet crimes against children.

¶ 2Plaintiffs, a group of escort service agencies and erotic dancing clubs, challenge the Tax as a violation of their First Amendment rights under the United States Constitution.We hold that the statutory provisions imposing the Tax on businesses whose employees provide services while nude are constitutional as a content-neutral regulation of conduct that imposes de minimis burdens on protected expression.However, we conclude that the provisions applying the Tax to escort services are unconstitutionally vague.

BACKGROUND

¶ 3 The Tax creates a mechanism for taxing businesses in which individuals perform services while nude or partially nude.Specifically, "[a] tax is imposed on a sexually explicit business equal to 10% of amounts paid to or charged by the sexually explicit business for . . . (a) an admission fee; (b) a user fee; (c) a retail sale of tangible personal property made within the state; (d) a sale of . . . food . . .; (e) a sale of beverage; and (f) any service."²A sexually explicit business is defined as any business where a "nude or partially denuded" employee or contractor "performs any service: (a) personally on the premises of the sexually explicit business; (b) during at least 30 consecutive or nonconsecutive days within a calendar year" and is paid or compensated for such service.³To be "nude or partially denuded" means that "any of the following [is] less than completely and opaquely covered: (a) genitals; (b) the pubic region; or (c) a female breast below a point immediately above the top of the areola."⁴

¶ 4The statute also provides for a tax on escort services.An escort service is "any person who furnishes or arranges for an escort to accompany another individual for: (a) companionship; and [for:](b)(i) a salary; (ii) a fee; (iii) a commission; (iv) hire; (v) profit; or (vi) any amount similar to an amount listed in this Subsection 2(b)."⁵An escort is "any individual who is available to the public for the purpose of accompanying another individual" for compensated companionship.⁶"[A] tax is imposed on an escort service equal to 10% of amounts paid or charged by the escort service for any transaction that involves providing an escort to another individual."⁷

¶ 5 The proceeds from the Tax are to be split between the Department of Corrections, Adult Probation and Parole Division, and the Attorney General's office.⁸Specifically, portions of the proceeds are dedicated to "provide treatment services" to individuals convicted of sex offenses, including indigent or nonworking adults, other individuals who are subject to Adult Probation and Parole jurisdiction, and juveniles.⁹A portion of the fund is also designated for a task force that "investigates and prosecutes individuals who use the Internet to commit crimes against children."¹⁰

¶ 6Plaintiffs, a group of escort service agencies and erotic dancing clubs, initiated this action against the Utah State Tax Commission(the "Commission") in 2004 by filing a complaint seeking (1) a declaratory judgment that the Tax was an unconstitutional burden on both their right to freedom of speech guaranteed by the First Amendment and their right to equal protection guaranteed by the Fourteenth Amendment; and (2) a permanent injunction against enforcement and collection of the Tax.Both parties moved for summary judgment.The district court granted the Commission's motion for summary judgment while denying Plaintiffs' motion.Specifically, the district court held that the Tax did not violate Plaintiffs' First Amendment rights because it was constitutional under United States v. O'Brien.¹¹The court also found that the Tax did not violate the Equal Protection Clause of the Fourteenth Amendment because the Tax was rationally related to the legitimate government interest in providing treatment for sex offenders.¹²

¶ 7Plaintiffs timely appealed the district court's grant of summary judgment to this court.We have jurisdiction pursuant to Utah Code section 78A-3-102(3)(j)(2008).

STANDARD OF REVIEW

We review a grant of summary judgment for correctness, according no deference to the district court's decision.¹³The district court's determination that the Tax is constitutional is also a legal conclusion that we review for correctness.¹⁴

ANALYSIS

¶ 8 In 1994, the city of Erie, Pennsylvania passed an ordinance making public nudity a criminal offense.¹⁵While the ordinance was a simple, generally applicable prohibition of public nudity on its face, it contained a preamble expressly acknowledging that the ordinance was adopted "for the purpose of limiting a recent increase in nude live entertainment within the City."¹⁶Additionally, Erie's city attorney stated that the ordinance "was not intended to apply to `legitimate' theater productions."¹⁷

¶ 9 When the ordinance was challenged by nude dancing clubs as an unconstitutional burden on their First Amendment right to engage in erotic nude dancing, the United States Supreme Court upheld the ordinance, concluding that its predominant purpose was to advance the city's interest in limiting negative secondary effects—an interest unrelated to the substantive content of nude dancing expression.¹⁸

¶ 10 The similarities between this case and Erie are substantial and important.Like the Erie ordinance, the Tax is both generally applicable and neutral as to message.Also like the Erie ordinance, the Tax was enacted, according to the record before us, with the predominant purpose of serving an important state interest unrelated to the substantive content of protected expression.The Tax is also similar to the ordinance in Erie in that it places only de minimis burdens on erotic nude dancing, a type of expression lying "only within the outer ambit of the First Amendment's protection"¹⁹ and "of a wholly different, and lesser, magnitude than the interest in untrammeled political debate."²⁰The Tax is distinguishable from the ordinance upheld in Erie only in its form and in the fact that the Tax is, in all respects, less broad and less burdensome than the Erie ordinance.

¶ 11We begin our analysis by evaluating the Tax's content neutrality and then assess whether it passes constitutional muster under the appropriate level of scrutiny.We determine that it does.We next turn to the question of whether the Tax is unconstitutionally overbroad and determine that it is not.We finish by analyzing whether the statutory provisions applying the Tax to escort services are unconstitutionally vague and conclude that they are.

I.THE TAX IS CONTENT NEUTRAL BECAUSE ITS APPLICATION IS TRIGGERED SOLELY BY CONDUCT, AND THE RECORD DOES NOT ESTABLISH THAT IT WAS ENACTED WITH THE PREDOMINANT PURPOSE OF SUPPRESSING PROTECTED EXPRESSION

¶ 12 A regulation of speech or expressive conduct is content neutral so long as the government interest underlying the regulation is not related to the suppression of protected expression.²¹A statute is "unrelated to the suppression of expression," and therefore content neutral, so long as it is both facially neutral²² and does not have the "predominant" purpose of suppressing protected expression.²³

¶ 13Plaintiffs' contention that the Tax is an unconstitutional burden on their First Amendment rights is based primarily upon their assertion that the Tax is content based.We disagree and conclude that the Tax is facially neutral because its application is triggered without reference to the content of any protected expression.Additionally, the record before us does not establish that the Tax was enacted with the predominant purpose of suppressing protected expression.

A.The Tax Regulates Nudity, Rather Than Nude Dancing, and Is Therefore Facially Content Neutral

¶ 14 The starting point for analysis of a regulation that impacts expressive conduct is the Supreme Court's decision in United States v. O'Brien, where the Court rejected the proposition that a "limitless variety of conduct" qualifies as speech simply because it is potentially expressive.²⁴Because all conduct is potentially expressive, holding that each law regulating conduct implicates the First Amendment would largely eviscerate the distinction between conduct and speech.

¶ 15 Instead, the Court has recognized that regulations of conduct, so long as the conduct is not inherently expressive, should be treated as content neutral if the regulations are neutral as to message.²⁵This is so because, in order to be content based, a regulation must classify based on the content of protected expression.A regulation that classifies based on unprotected ...