ticket tax sidestep?
The proposed non-binding Term Sheet for a new $2.1 billion football stadium tries to avoid calling a new charge to stadium users a tax. The Term Sheet uses the word “rent” instead. Let’s explore why the Mayor and the team are tossing this fake.
Let’s start with the current ticket tax. The way many local taxes work in Tennessee is that the State creates authorizing legislation and then local governments may choose to implement the tax. The State of Tennessee, at Tennessee Code Annotated, Section 7-3-202, authorizes a “municipal stadium seat privilege tax” or “ticket tax.” Metro is eligible to charge a ticket tax for pro football and concert events at Nissan Stadium. The tax cannot be more than 10% of the ticket price. The tax must be approved by two-thirds of the Metro Council, which is 27 votes. This is higher than the normal threshold, which is a majority (21 votes).
In November 2009, Nashville enacted a $2 per ticket tax. The legislation required a two-thirds affirmative vote from the Council. In December 2011, the ticket tax was raised to $3 per ticket — again by a two-thirds affirmative vote of the Council. The ticket tax remains at $3 per ticket today. The Titans collect the tax from customers as they sell tickets and then pay the tax revenue to the city.
The Term Sheet pending before the Council now, at page 16, requires the current $3 per ticket tax to remain in place. The Term Sheet says:
“The Metropolitan Government will continue to levy at the Stadium the ticket tax of $3.00 per ticket currently being levied at the Existing Stadium.”
On the same page of the Term Sheet, the Mayor and the team add a new “per ticket” charge to customers that they are calling “Rent.” The Term Sheet says that the “Rent” will be $3.00 per ticket sold to all non-NFL events:
“StadiumCo will agree to pay rent to the Authority on a periodic basis in the amount of $3.00 per ticket sold to all non-NFL events at the Stadium.”
The combined impact is that Titans ticketholders will pay a $3 additional charge per ticket, and folks who go to concerts or WrestleMania will pay a $6 charge per ticket.
It’s clear that “per ticket” charges are paid by customers. It’s clear that state law treats “per ticket” charges at municipal football stadiums as a privilege tax. So why the crafty lawyering? Why not just call it an additional ticket tax in the Term Sheet, instead of “Rent”?
One theory is that they might be trying to sidestep the 10% cap on the ticket tax under state law. But since all or almost all tickets at a new stadium would be more than $60, this theory isn’t convincing.
A second theory might have something to do with whether it is appropriate to charge a different ticket tax for NFL events and non-NFL events. I don’t know the answer to that.
A third theory is that the Mayor and the team are trying to sidestep the requirement of getting a two-thirds affirmative vote from the Metro Council for the new $3 per ticket charge. Conventional wisdom around the Metro Courthouse is that the Council had leverage to obtain concessions during soccer stadium negotiations because 27 votes were required for one of the important pieces of soccer stadium legislation. Maybe they are trying to avoid that dynamic?
No matter what the motivation is, this new $3 per ticket charge quacks like a ticket tax. It strikes me that there’s risk that ticket buyers at future non-NFL events will be bothered (maybe to the point of litigation??) by paying a $3 per ticket tax that hasn’t been properly enacted under the rules established by the state.