What should the court decide and why?
Twenty-one states and eight cities have what is commonly called a “jock tax.” These are municipal taxes that were passed primarily to obtain revenue from athletes, coaches, trainers, and highly paid entertainers when they are present in the city for purposes of earning income. All professional sports events and concerts bring revenue from the players and artists in the form of state and municipal income taxes.
Indianapolis Colt player Jeff Saturday challenged the city of Cleveland’s collection of municipal taxes from him. In 2008, the Colts paid Jeff Saturday $3,577,561.11 in compensation and attributed $178,878 (approximately 5% of Mr. Saturday’s total compensation) to a game the Colts played in Cleveland during 2008. The calculation employed the “games played” method of calculation. For example, if the team played 20 games, then 1/20 of the income, or 5%, is allocated to each of the cities involved as the required jock tax. The Colts withheld the allocated Cleveland tax, or $3,594. However, Mr. Saturday did not travel to the Cleveland game because he stayed in Indianapolis and participated in rehabilitation for a knee injury, as ordered by the team’s physician.
Mr. and Mrs. Saturday, who filed a joint tax return, applied for a refund from Cleveland. Cleveland refunded $322. The Saturdays appealed to the board of review, which upheld the amount of the payment and the refund. The Saturdays then appealed the refund amount to the Board of Tax Appeals (BTA), and the BTA affirmed the decision of the review board. The Saturdays appealed that decision to the Ohio Supreme Court. The city of Cleveland argued that even though Mr. Saturday was not present for the game, there was a part of his salary that was attributable to the playing of the game in Cleveland and was, therefore, taxable. What should the court decide and why? [Saturday v Cleveland Board of Review, 33 N.E.2d 46 (Ohio 2015)]
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