Knoxville, Tenn--(UT Sports) On August 25, the Knox County Commission made the decision to repeal the county's portion of the "amusement tax", a tax that is applied only to ticket sales for University of Tennessee (UT) football and men's and women's basketball home games. The 5.0% tax on tickets sold to UT games at Neyland Stadium and Thompson-Boling Arena has been divided between the City of Knoxville (4.5%) and Knox County (0.5%).
The University of Tennessee department of athletics (Tennessee Athletics) has an annual economic impact on Knoxville and the East Tennessee region of approximately $151 million. The economic boon from fall football games at Neyland Stadium and men's and women's basketball games at Thompson-Boling Arena benefit a broad number of local businesses, including hotels, restaurants and other entities which recognize significant financial gain directly affiliated with UT home sporting events.
Despite the positive and direct benefit to the local economy, tickets to UT football and men's and women's basketball games have remained subject to a total tax rate of 14.25%. Excluding the 9.25% state and local sales tax, the five percent "amusement tax" has resulted in an annual $1.6 million financial burden to Tennessee Athletics.
Tennessee Athletics is the only intercollegiate athletics program in the SEC and the nation that is burdened with this type of tax, placing UT at a competitive disadvantage amongst its peers.
A few items to consider in the context of the amusement tax:
The tax is only targeted at UT's own football games at Neyland Stadium and men's and women's basketball games at Thompson-Boling Arena. Concerts and other ticketed events that take place in both UT venues are not taxed. While it makes sense that events (such as concerts) which provide an economic benefit to the city and region are NOT assessed this targeted tax, it should also make sense to apply the same logic to events that generate a far greater economic benefit to the city such as UT football and basketball games.
Tennessee Athletics and its supporting fans encounter a tax burden faced by no other intercollegiate athletics program or fan base in the nation. Taxes on tickets to UT football and basketball games are taxed at a combined 14.25%, including a 9.25% state and local sales tax and the "amusement tax" that is 4.5% for the City of Knoxville and, before repeal, 0.5% to Knox County. At least four SEC athletic programs are not subject to sales tax, and furthermore, no other school in the SEC and the nation is subject to an amusement tax of this nature. The total tax burden for Tennessee Athletics is an SEC-high $4.3 million per year.
No other University (or sports entity) in America is forced to pay a municipality a tax based on ticket sales for playing home games in their own facilities.
The funding lost due to the amusement tax can be more effectively utilized by Tennessee Athletics in the following ways:
Improving fan experience at Neyland Stadium. Funds currently paid in amusement taxes could be used in a variety of ways to improve the Neyland Stadium fan experience. These improvements could include facility enhancements to the stadium, particularly on the East and South concourses (restrooms, concessions, etc.), as well as, improved Wi-Fi/wireless connectivity, video/audio systems, wayfinding signage, and other capital upgrades.
Student-athlete welfare. With the changing NCAA governance landscape, student-athletes will likely receive additional scholarship support to cover the full cost of attendance. Additionally, there will likely be opportunities to provide for greater nutritional, physical and mental well-being for student-athletes. This new paradigm will bring additional recurring costs to athletic departments that could easily exceed $1.5 million per year.
Tennessee Athletics also has a current SEC-low reserve of $2 million. There are multiple reasons for such a low reserve, including many historical financial models that are no longer sustainable. The amusement tax falls into this category. Tennessee Athletics was taxed a total of nearly $13.6 million over a 10-year period from fiscal years 2003-04 through 2012-13 while being projected to pay an additional $8 million because of this tax over the next five years.
The UT football program has three neutral site games currently scheduled in the coming years: a 2015 game against UAB at LP Field in Nashville, the 2016 "Battle at Bristol" against Virginia Tech at Bristol Motor Speedway, and a 2018 game in Charlotte against West Virginia. UT is engaged in various discussions with other cities about playing additional neutral site games.
The recruiting benefits along with the ability to play in markets where UT football has a significant fan base are the primary reasons for moving games to neutral sites. However, UT acknowledges the inherent financial benefit in neutral site games because of the non-existence of an amusement tax. In many respects, the amusement tax serves as a financial impediment to justify moving neutral site games to Knoxville, and thereby, transfers the economic impact and benefit to another city, disadvantaging Knoxville-area hotels and restaurants.
The following is a link to the 2012 Economic Impact Analysis of Tennessee Athletics by the UT Center for Business and Economic Research: http://www.utsports.com/genrel/012313aab.html