PART 1. COMPTROLLER OF PUBLIC ACCOUNTS
SUBCHAPTER CC. SEXUALLY ORIENTED BUSINESS FEE
The Comptroller of Public Accounts adopts new §3.722, concerning sexually oriented business fee, with changes to the proposed text as published in the January 4, 2008, issue of the Texas Register (33 TexReg 64).
The new rule incorporates legislative changes in House Bill 1751, 80th Legislature, 2007, that amended Business and Commerce Code, Chapter 47. House Bill 1751 amended the Business and Commerce Code to impose on a sexually oriented business a fee for each entry by each customer admitted to the business. This new rule provides definitions, registration requirements, fee calculation, due date and reporting requirements and record requirements.
We received identical comments from the Texas Legal Services Center (TLSC) and Texas Association Against Sexual Assault (TAASA). Following is a summary of the comments received and the responses.
TLSC and TAASA asked that the rule include a de minimus exception from the fee for entities that do not regularly sponsor covered performances. We declined to do so because any such change to the rule would be contrary to Business and Commerce Code, §§47.051, 47.052 and 47.053.
TLSC and TAASA recommended that subsection (c)(3) be amended to delete the reference to wet t-shirt contests to describe a type of event subject to the fee even though the business hosting the event does not habitually engage in the activity described in (a)(3). We declined to make this change since the reference to a wet t-shirt contest is used as an example and therefore would be due only to the extent that this activity or other activities meet the requirements described in subsections (a)(2) and (a)(3).
TLSC and TAASA requested that we modify subsection (h) to require that any change made to original bookkeeping entries be duly noted as to the reason for change and a signed entry made to verify the reason for any changes in the original daily records. We declined to make this change because subsection (i) currently allows the comptroller to determine if accurate records are kept and to calculate the proper amount of fee due if accurate records are not kept.
The comptroller clarified in subsection (c)(1) how a sexually oriented business is to determine the amount of fee that is due from the sexually oriented business when there is more than one entry by the same customer on the same business day at the same location.
The comptroller clarified in subsection (c)(2) that a sexually oriented business that includes a separately stated charge for the fee on the customer check, but that does not clearly identify the charge as reimbursement is considered a tax collected from the customer and these amounts must be remitted to the comptroller in addition to the normal entry fee.
This new section is adopted under Tax Code, §111.002 and §111.0022, which provide the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2, and taxes, fees, or other charges which the comptroller administers under other law.
The new section implements Business and Commerce Code, §§47.051, 47.052, 47.053, 47.054, and 47.056.
§3.722.Sexually Oriented Business Fee.
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Customer--Any person on the premises of a sexually oriented business except:
(A) an owner, operator, independent contractor of the business or an employee of that sexually oriented business; or
(B) a person who is on the premises exclusively for repair or maintenance of the premises or for the delivery of goods to the premises.
(2) Nude--To be entirely unclothed, or clothed in a manner that leaves uncovered or visible through less than fully opaque clothing any portion of the breasts below the top of the areola of the breasts, if the person is female, or any portion of the genitals or buttocks.
(3) Sexually oriented business--A nightclub, bar, restaurant, or similar commercial enterprise that:
(A) provides for an audience of two or more individuals live nude entertainment or live nude performances; and
(B) authorizes on-premises consumption of alcoholic beverages, regardless of whether the consumption of alcoholic beverages is under a license or permit issued under the Alcoholic Beverage Code.
(b) Questionnaire. A sexually oriented business, as defined in this section, is required to complete and submit a Texas sexually oriented business fee questionnaire on a form prescribed by the comptroller to file the report and remit the fee imposed under Business and Commerce Code, Chapter 47.
(c) Imposition and Calculation of Fee.
(1) A $5.00 fee is imposed on a sexually oriented business for each entry by each customer admitted to the business. In determining the amount of fee due by a sexually oriented business for more than one entry by the same customer on the same business day at the same location, it shall be presumed to have been one entry by the customer and the fee amount due from the business for the entry is $5.00. A business day begins when the business opens and continues until the close of business.
(2) A sexually oriented business has the discretion to determine how it will derive the money to pay the fee. All door and cover charges, including reimbursement of the sexually oriented business fee from its customers, are subject to sales tax as provided by Tax Code, Chapter 151. A sexually oriented business that chooses to recover the fee from its customer by including a separately stated charge for the fee on the customer check or invoice must clearly identify the charge as a reimbursement. A charge not clearly identified as reimbursement of the fee is considered a tax collected from the customer and these amounts must be remitted to the comptroller in addition to the $5.00 entry fee.
(3) A business that holds occasional events described in subsection (a)(3) of this section, but does not habitually engage in the activity described in subsection (a)(3) of this section is liable for the sexually oriented business fee for those occasional events. For example, a nightclub that hosts a wet t-shirt contest is liable for the fee based upon attendance during the event.
(d) Report forms. The sexually oriented business fee must be reported on a form as prescribed by the comptroller. The fact that the sexually oriented business does not receive the form or does not receive the correct form from the comptroller for the filing of the return does not relieve the business of the responsibility of filing a return and remitting the fee.
(e) Due date of report and payment.
(1) The sexually oriented business fee report and payment are due no later than the 20th day of the month following the calendar quarter month in which the liability for the fee is incurred.
(2) A sexually oriented business must file a quarterly report even if there is no fee to report.
(f) Penalty. Penalties due on delinquent fees and reports shall be imposed as provided by Tax Code, §111.061.
(g) Interest. Interest due on delinquent fees shall be imposed as provided by Tax Code, §111.060.
(h) Records required.
(1) A sexually oriented business is required to maintain records, statements, books, or accounts necessary to determine the amount of fee for which the business is liable to pay.
(2) A sexually oriented business shall record daily the number of customers admitted to the business. The manner in which a sexually oriented business maintains records of the number of customers admitted to the business may be written, stored on data processing equipment, or may be in any form that the comptroller may readily examine.
(3) The comptroller or an authorized representative has the right to examine any records or equipment of any person liable for the fee in order to verify the accuracy of any report made or to determine the fee liability in the event no return is filed.
(4) Records required by the comptroller must be kept for at least four years after the date on which the records are prepared. A business must make records available for inspection and audit on request by the comptroller.
(i) Failure to keep accurate records. If a sexually oriented business fails to keep accurate records of the number of customers admitted to the business the comptroller may estimate the amount of fee liability based on any available information that includes, but is not limited to, any reports required to be filed per Tax Code, Chapter 151 or Chapter 183.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on June 4, 2008.
TRD-200802874
Martin Cherry
General Counsel
Comptroller of Public Accounts
Effective date: June 24, 2008
Proposal publication date: January 4, 2008
For further information, please call: (512) 475-0387