Columbus, Ohio — Revenue earned by NASCAR from the sale of auto racing broadcast rights and merchandise to Ohio fans is not subject to the state’s business activity tax, according to an Ohio Supreme Court ruling Tuesday morning.
The court unanimously waived a red flag at Ohio’s tax commissioner, who ordered NASCAR to pay the state nearly $550,000 for money it earned through broadcast racing, online marketing, and sponsorship fees. The court is split, 4-3, on whether the state can tax the licensing fees that NASCAR gives out to banks, insurers and manufacturers — including a maker of NASCAR-branded cups and mystery dice, according to Court News Ohio, a service of the Ohio court. Supreme.
On January 25, NASCAR Holdings Inc. In Daytona Beach, Florida, a court has argued that the Ohio Business Activity Tax, also known by its acronym “CAT,” is illegal. Almost all businesses with total receipts of more than $150,000 are assessed a business tax in the state, regardless of whether or not they are located in Ohio.
The case ended up in Ohio Supreme Court because the Ohio Tax Commissioner’s Office reviewed NASCAR in 2011 for commercial activity it said took place in the state, primarily through broadcasts of races in Ohio, from July 1, 2005 to December 31, 2010. NASCAR has determined 186 owed taxes. Million dollars in proceeds in Ohio. The Ohio Board of Tax Appeals upheld the commissioner’s decision.
Fox and Speed Channel Inc. and other media outlets over rights to broadcast NASCAR intellectual property in select regions, including Ohio, and the state argued in court in January. NASCAR gets paid for broadcast licenses. The state said the tax commissioner said state law requires the revenue to be treated as gross revenue subject to the CAT.
But Justice Pat DeWine, writing for the majority, analyzed how the dispute focused on intellectual property used in the state. Specify NASCAR’s contracts granting the rights to use its trademarks and logos throughout the country and the world. None of the contracts linked payments to NASCAR for the right to use its property specifically in Ohio. DeWine writes that the revenue streams are not based on NASCAR’s intellectual property in Ohio.
NASCAR said it races at more than 100 tracks across 39 states and Canada and broadcasts races in more than 150 countries.
The decision would greatly reduce NASCAR’s tax bill for the state. You will no longer have to pay taxes on $186 million in revenue, but on revenue less than $500,000, according to an Ohio News Court report.
The Ohio Supreme Court returned the case to the Ohio Board of Tax Appeals to determine what, if any, taxes NASCAR owes for hosting seven races in Ohio in a series of smaller races that occurred between 2005 and 2010.
All of the Republican justices on the court—Chief Justice Maureen O’Connor, Justices Sharon Kennedy and Patrick Fisher—joined the opinion of DeWine, also a Republican.
In a favorable opinion, Judge Melody Stewart, a Democrat, wrote that NASCAR’s licensing contracts, unlike its broadcast deals, allow the company to charge additional revenue on sales made using its brands. She wrote that the state had the right to estimate and tax a portion of those sales that occurred in Ohio.
Fellow Democratic justices Michael B. Donnelly and Jennifer Bruner to Stewart’s opinion.
The case has attracted the interest of the business community. The Ohio Chamber of Commerce filed an amicus brief supporting NASCAR, opposing the CAT in this case.
Laura Hancock covers politics and politics in Columbus. Read more of her stories over here.