You asked (1) how Connecticut currently taxes items sold at sex shops, X-rated movies and videos, and sexually explicit publications; (2) whether a state can impose a special higher tax on any or all of these types of commodities; and (3) whether any other states have such taxes.

SUMMARY

Connecticut does not currently impose any special higher taxes on sexually explicit items, businesses, or services. In general, retail sale of tangible personal property and sales of certain specified business services are subject to a 6% sales tax, though higher and lower taxes apply to certain sales. Over-the-counter magazine sales are covered by the regular sales tax though subscription sales are exempt. Connecticut also charges a 10% admission tax (6% for movies) and a 10% dues tax. Like the sales tax, neither of these taxes singles out adult entertainment or sexually explicit shows or movies.

Although more extensive legal research would be needed if there were a serious proposal to impose special taxes on sexually explicit material, it appears that the state could impose higher taxes on sales of sexually explicit items or services, but that special taxes on X-rated books, magazines, videos, and movies might be vulnerable to constitutional challenges on First Amendment grounds. Actual pornography is illegal and has no constitutional protection, so there is no bar to imposing any kind of taxes on it.

Among other states, only Utah has so far imposed a separate higher tax on adult businesses and escort services. The tax went into effect on July 1, 2004. At least four other states (California, Georgia, Iowa, and Missouri) have seen bills introduced to impose such taxes, but so far none of the bills has been enacted. We can provide copies of Utah’s law and the other states’ proposals to you upon request.

CURRENT TAXES

Sales Tax

Connecticut imposes sales and use taxes on retailers’ gross receipts from sales of most tangible personal property, on the rental or leasing of most such property, and on gross receipts from the sale of certain services. The tax rate is 6% on most sales. But rates are higher or lower on certain specified items or services. For example, the tax rate on charges for hotel rooms rented for less than 30 days is 12% and the rate on sale of computer and data processing services is 1%. Many specified items are exempt from the taxes. Current law does not make any distinctions in rates based on whether the retailer selling a taxable item is a sex shop or a sexually oriented business.

Sales of all types of newspapers and sales of magazines by subscription are currently exempt from state sales tax, although Connecticut imposed a 6% tax on sales of newspapers and magazines between April 1, 2003 and July 1, 2004. Over-the-counter magazine sales are subject to the regular 6% sales tax.

Admissions and Dues Taxes

Connecticut imposes a 10% tax on the admission charge to any place of amusement, entertainment, or recreation. The tax on movie tickets is 6%. There is also a 10% tax on the membership dues or initiation fees to any social, athletic, or sporting club. As with the sales tax, the state does not have higher tax rates for adult entertainment venues or X-rated movies.

POWER TO PLACE EXTRA TAX ON SEXUALLY EXPLICIT COMMODITIES

It appears that the state could impose an additional excise tax on sales of items or services by certain types adult businesses or sex shops, similar to the extra taxes on the sale of liquor and cigarettes. Similarly, it could impose higher admissions or dues taxes for admissions to clubs or bars offering sex-related shows. Such taxes might be challenged on equal

protection grounds, but as long as the tax rate was not confiscatory and the state could show a rational basis for the tax, it would likely be upheld.

Higher tax rates on sales of sexually explicit magazines, books, or videos or higher admission taxes on admissions to X-rated movies would likely be challenged under the First Amendment. Such taxes might be harder for the state to justify as First Amendment cases are subject to stricter scrutiny by the courts.

Pornography has no constitutional protection and thus can be taxed at whatever rate the state desires. But pornography is also illegal.

OTHER STATES

Law Enacted

Utah enacted a law in 2004 that imposes a 10% excise tax on transactions conducted by a sexually explicit business or escort service. For sexually explicit businesses, the tax is 10% of amounts paid for admission fees, user fees, retail sales of tangible personal property, or sales of food or drinks. For escort services, the tax is 10% of amounts charged for transactions involving providing escorts. The revenues from the tax are earmarked for its administration; for the Department of Corrections; and for investigations into, and prosecutions of, those who use the Internet to commit crimes against children (HB 239, 2004 General Session).

Bills Introduced

California. In 1997, a California senator introduced a bill to impose a 5% excise tax on gross receipts from the sale of adult entertainment products. The bill earmarked the tax revenue for a Victims of Violent Crime Support Fund that it would have created (SB 1013).

Georgia. HB 964, introduced in 2003, would have imposed the following additional taxes:

Iowa. HB 2242, introduced in 2004 and modeled on Utah’s law, would impose a 25% tax on all goods and services sold, leased, or rented by an “adult enterprise. ” Tax revenue would be earmarked for the state victim compensation fund and for grants to those providing care for victims of domestic abuse, rape, and sexual assault.

Missouri. SB 821, introduced in 2004, would impose an additional 5% tax on retailers’ gross receipts from sales of adult entertainment and services and from charges for sexually explicit live performances.

JL: ro