The ordinary American will primarily file income taxes in the states where they reside. Professional athletes have an additional liability, the “athlete tax”. The jock tax is imposed on visitors to a city or state who earn money in that jurisdiction. Professional athletes are an easy target for this type of tax as their salaries, bonuses and schedules are all known to the public. The state can calculate and collect the tax without spending a lot of time and effort.

The modern jock tax came into effect after the 1991 NBA Finals between the Los Angeles Lakers and the Chicago Bulls. The State of California imposed the jock tax on the income of Chicago Bulls players, coaches, coaches and other staff who made the trip. Illinois quickly fought back with its own tax on jocks, commonly known to Chicagoans as “Michael Jordan’s Revenge”. The Illinois Jock Tax Law states, “If you tax us, we’ll tax you immediately.” Today, twenty-one states and eight municipalities have taxes on jocks. California has the highest version of the jock tax to date at 13.3%, and in 2013 the state collected $ 229.2 million in tax revenue from visiting professional teams.

In Tennessee, instead of a certain percentage of salary, the state imposed a jock tax of $ 2,500 per game for up to three games. These millions of dollars in taxes were used to fund the state’s two arenas in Nashville and Memphis. The NBA ultimately sued the state by claiming that dozens of players owed more in taxes than they earned while playing. A settlement was reached in 2014, and the city of Memphis has paid more than $ 2.38 million of the jock tax collected since 2009. Since then, Tennessee has ended the jock tax, and the 2016-2017 season was the first season. in which NBA players were not subject to a tax when playing in Tennessee.

There is no jock tax in Florida, Washington, Washington DC, Tennessee or Texas. In February 2017, the nation’s most-watched sporting event, the Super Bowl, took place in Houston, TX between the New England Patriots and the Atlanta Falcons. It gave players and staff on both teams thousands of reasons to celebrate their achievements by reaching this illustrious game. Players on the winning team earn almost $ 110,000 per player with their Super Bowl ring valued at $ 20 to 25,000, while those on the losing side each receive $ 53,000. The winners had to pay around $ 17,000 each in tax dollars while the losers paid around $ 7,000.

When you see that a new NFL or NBA player has signed a multi-million dollar contract, just know that he will be filing taxes in 15-20 different states every year. This forces athletes to hire accountants to manage their taxes. Imagine being an equipment manager or scout who doesn’t earn much more than the national median income and has the burden of filling out all those tax returns without having the extra financial means to hire professional help. The Tax Foundation says, “This tax hits many people who may not be able to easily absorb the substantial compliance costs associated with the tax.”

Advice for the taxpayer

Stay up to date with the latest national and local tax rates. Be sure to check out any obscure tax laws that may apply to you or your business. You are responsible for paying taxes in all states where income has been collected. During an audit, the taxpayer will be responsible for the exact amount of tax. Stay current with the laws in your state, county, and city.