KC Chiefs take $1M sales tax fight to MO Supreme Court
Sunday, September 29, 2019
The Kansas City Chiefs, with its star quarterback Patrick Mahomes, is among the handful of teams that National Football League watchers say have a shot at winning Super Bowl LIV next February.
But the Missouri professional football team could be facing a tougher fight off the field.
Last week, the Chiefs' attorneys argued before the Missouri Supreme Court that most of the NFL team's expenditures on items to renovate Arrowhead Stadium almost a decade ago should not be subject to the state's sales tax.
This current court tax battle, which started in 2014, is due to an appeal by the team of a Missouri Department of Revenue panel's decision that the Chiefs owe more than $1 million in back taxes related to the facility's refurbishment.
A state audit, on the other hand, contends that the team used the Jackson County Sports Authority's tax exemption on parts of the 2008 to 2010 stadium renovation that it shouldn't have.
In question are sales tax exemptions on $23 million in purchases.
Media reports say the state auditor found that items such as leotards for cheerleaders and weight-lifting equipment didn't fall under the public purpose of fixing up the stadium. Therefore, the state says the Chiefs should have paid the $1 million plus in sales tax on those items.
That $1 million+ tax amount earns this week's By the Numbers recognition.
Long-simmering tax fight: The overall stadium renovations total almost a decade ago came to $375 million.
Around $250 million of that was raised by a 2006 voter-approved 3/8ths of a percent sales tax. The remainder was paid by the Chiefs.
The Chiefs argue that most of the $125 million the team kicked in should be exempt from sales tax because the money went into a fund controlled by the Jackson County Sports Complex Authority.
The ultimate tax decision isn't a fiscal make-or-break for a professional football team that's estimated to be worth more than a billion dollars.
What is at stake in the legal challenge is the tax principle.
Owner vs. contractor status: The determining factor in who owes the tax could come down to whether the team is deemed an owner in connection with the stadium work or just a contractor, reports Jacqueline Lemp in the Missourian.
If the Chiefs are the owners, then they are liable for the taxes. If, however, they are considered to be just a contractor, then they would not have to pay the sales tax bill.
The Chiefs organization contends that most of the $125 million the team kicked in should be exempt from sales tax because the money went into a fund controlled by the Jackson County Sports Complex Authority.
"While the Chiefs are listed as the owner, it's very clear that the only owner was the county," which administered the sports complex fund into which the team put its part of the renovation, according to Chiefs' attorney Mark Olthoff.
The state, however, says that since the Chiefs name was listed on the purchase orders and they were able to choose the items for the stadium, they bear the tax responsibility.
"Under the sales and use tax, since they are the purchaser, they are responsible for that," Assistant Deputy Attorney General for Special Litigation Justin Smith told the justices.
You also might find these items of interest:
- Pro athlete trades get tax relief from IRS
- Tax subsidies for sports facilities under fire again
- 'Justin' Bieber and other collectible baseball cards face a special capital gains tax rate
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