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Expectations were high six years ago when the Utah Legislature enacted a 10 percent tax on escort services, and semi-nude and fully nude clubs.

Lawmakers predicted the tax on sexually oriented businesses would rake in as much as $1 million per year, which was earmarked to pay for sex offender treatment programs and investigations of Internet child sex crimes.

But the potential tax base was whittled down when the Utah Tax Commission exempted semi-nude clubs. And later the Utah Supreme Court struck down the portion of the law applying to escort services.

As of Tuesday, when the U.S. Supreme Court declined to hear a challenge to the tax mounted by strip club owners, just one club remains affected by the decision: Southern Exposure, on Beck Street in Salt Lake City, which features full frontal nudity.

"There's not enough money in this tax to justify collecting it," said attorney Andrew McCullough, who represents Denali LLC, the owner of Southern Exposure.

Charlie Roberts, a spokesman for the Tax Commission agreed Tuesday that the amount of tax collected from Southern Exposure was "not very much." Roberts said an exact amount was not immediately available.

McCullough said other Utah businesses, including American Bush, Inc., of South Salt Lake, were watching the progress of the lawsuit.

"They wanted the freedom to do that [go fully nude], but didn't want to be taxed," he said.

The tax covers everything a sexually explicit business sells, from admission, to T-shirts and food. At least a dozen other states, including California, Colorado, Kansas and Iowa, have been interested in the outcome of the case before trying to enact their own similar taxes.

Assistant Utah Attorney General Brent Burnett, who was representing the Tax Commission, said his office had expected the U.S. Supreme Court to reject hearing Denali's case since it generally accepts only cases where there has been a split decision in the lower courts, or where a significant issue has not previously been decided.

McCullough said the U.S. Supreme Court might eventually weigh in on the issue depending on the outcome of a somewhat similar case in Texas, where there is a $5 surcharge on admission to strip clubs.

McCullough said that in 2004, the Utah Legislature had intended all nude and semi-nude dancers to be taxed.

But when the Tax Commission compared the legislature's definition of nudity to that established by the state liquor code — which controls what dancers wear in bars — the Commission found enough conflict that they sent refunds to owners of semi-nude clubs and discontinued further taxation, McCullough said.

Later, when the case reached the Utah Supreme Court, escort services were exempted from paying the tax because the definition of an escort was too broad.

The tax law's defined an escort as anyone who provides companionship for a fee, which could have been construed to include companions for the elderly, "and maybe even babysitters," McCullough said.

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