TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, December 14, 2013

NY Times: Tennessee Flat Rate Jock Tax Makes NBA a Losing Proposition for Journeyman Pros

New York Times:  For Some Players, Tax Ensures a Loss Even After a Win:

Like many states, Tennessee charges opposing athletes a tax when they visit for games. But Tennessee is the only one to charge the same flat rate to LeBron James, who makes about $19 million a year, and [Nate] Wolters, who makes $500,000. Tennessee’s rate is $2,500 a game, with a maximum charge of $7,500 a year. ...

More than a third of hockey players have lost money when playing in Tennessee, said Don Zavelo, the general counsel for the NHL Players’ Association. But the NHL pays the jock tax for the players as part of the league’s recent collective bargaining agreement. Basketball players are on their own. About 20 percent of NBA players have either lost money or broken even in Memphis, according to the National Basketball Players Association.

Advocates for the players argue that the law has turned professional sports, long heralded as the most lucrative of dream jobs, into a money-losing proposition for the most vulnerable players. ...

Tennessee is not the only state or municipality grappling with questions over the jock tax. Two cases winding their way through Ohio’s courts are raising questions of whether a city or state can tax an athlete who does not travel there, and what formula it should use to determine how many days a player has worked.

Because of an injury, center Jeff Saturday did not travel with the Indianapolis Colts to Cleveland in 2008 to play the Browns. But Cleveland officials sent him a tax bill for $3,294. Saturday, now retired, has sued the city, arguing that he should not be taxed because he did not physically work in the state

Alan Pogroszewski (St. John Fisher College) & Kari A. Smoker (SUNY-Brockport), Is Tennessee's Version of the "Jock Tax" Unconstitutional?, 23 Marquette Sports Law Review 415 (2013):

A professional athlete who earns the minimum salary in the NHL and performs services in the state of Tennessee—that is, he shows up on game day—will owe more in taxes than what he earned that day.  Tennessee’s Professional Privilege Tax fails Commerce Clause scrutiny because it is not fairly apportioned, it is discriminatory, and it is not fairly related to the services provided by the state of Tennessee. The tax is therefore unconstitutional and puts the state in serious jeopardy of potential lawsuits from both the NHL Players’ Association and National Basketball Player’s Associations. More importantly, Tennessee’s flat tax cannot be tolerated because it will open the floodgates to other discriminatory state tax measures. In the words of the Supreme Court, “acquiescence in these flat taxes would occasion manifold threats to the national free trade area,” which is a clear violation of the Commerce Clause.

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