The “Jock Tax” and What Entertainers Need to Know    

Jul 05, 2023 | Law Student Blog,

by Jacob Neukirch
University of New Hampshire Franklin Pierce School of Law, Juris Doctor Candidate, 2024

What is the Jock Tax?
The Jock Tax is a form of income tax that states and municipalities apply to nonresident individuals who do business in those areas. There are over twenty states that impose some form of jock tax. Additionally, municipalities such as Detroit, Kansas City, and St. Louis also impose jock taxes. The tax, while applicable to various groups of people, is most well-known for its application to professional athletes, hence its name.

The Jock Tax as a concept has existed since the 1960s but quickly gained popularity in the 1990s. In 1991, after Michael Jordan and the Chicago Bulls defeated the Los Angeles Lakers in Los Angeles during the NBA Finals, the state of California informed Jordan that he and his teammates were required to pay income tax on the earnings they accumulated while playing there. In response, the state of Illinois passed a bill, known as Michael Jordan’s Revenge, imposing a Jock Tax on athletes only from states and cities that imposed a Jock Tax on Illinois based athletes.

Since 1991, a large majority of states and several cities have passed a form of Jock Tax. The reason is simply that the enormous salaries that professional athletes make means that these states can gain thousands or even tens of thousands of dollars in tax revenue for each athlete who travels to play in the state.

Does the tax apply only to athletes?
Despite its name, the Jock Tax applies to far more people than one might think. While athletes are obviously subject to the Jock Tax, other employees who travel with the athletes are subject to it as well. These individuals include the coaches, trainers, and other traveling support staff for a professional sports team. Additionally, individuals who have no connection to athletics are also subject to the tax. Individuals such as artists, musicians and other performers are required to pay the same Jock Tax as athletes. The exact definition of who is subject to the Jock Tax will vary from state to state. For example, the state of Missouri’s Jock Tax is codified in Income Tax Section 143.183, and it defines a “nonresident entertainer” who is subject to the tax as:

“a person residing or registered as a corporation outside this state who, for compensation, performs any vocal, instrumental, musical, comedy, dramatic, dance or other performance in this state before a live audience and any other person traveling with and performing services on behalf of a nonresident entertainer…”

What this statute says is that any person who conducts an artistic performance in the state is subject to paying income tax on the money they earn in Missouri. This statute describes who is subject to the tax only in Missouri, and other states will define who is subject to the tax differently. Therefore, it is important for those who perform in multiple states to understand the tax rules of each of those states.

How to calculate the tax?
Like many aspects of the Jock Tax, the way that an individual calculates the amount they owe can vary from state to state. Each state will define their own way of calculating the tax and there can be differences in how that tax is calculated. However, most states will rely on a method known as the “duty day” approach, which are the days that an athlete is on duty. A general approach is for the state to divide the number of duty days that an athlete is in the state by the total number of duty days in a year. The total number of duty days starts when the athlete reports for mandatory preseason training and stops when the athlete’s season is over, either the end of the regular season or the postseason.

A simple example would be an MLB player who makes a total of $10 million for the season. That player has a total number of duty days of 200 for the year and plays 10 games in State A. The player would first divide the number of duty days in State A by the total number for the year. Next, the player would multiply that number by their total income, which would produce the taxable income for State A. Finally, the player would multiply the state taxable income by State A’s tax rate to find the amount of tax they must pay. For this example, the state tax rate will be assumed to be 5%.

1. 10 state duty days / 200 total duty days = 5% of duty days attributable to State A
2. 5% (State A duty days) X $10 million salary = $500,000 taxable income in State A
3. $500,000 State A taxable income X 5% (State A tax rate) = $25,000 in taxes owed to State A
4. This process would be repeated by the player for every state that they had games in.

This process of apportioning income between states is the same for both athletes and other performers. This is where knowledge of the individual state law is important because what constitutes a duty day for an artist or musician might be different than for an athlete. Additionally, some states use alternative methods to calculate how much a performer must pay under the Jock Tax.

A good example would be Missouri, which uses both the duty day (called “performance days”) method and an alternative method. In Missouri, the venue that pays the entertainer for their services is responsible for withholding 2% of the compensation paid to the entertainer for their performance if the compensation exceeds $300. This operates on the same idea as an employer withholding the taxes from their employee’s paycheck.

If the venue does not withhold the 2% from the compensation, then the entertainer is responsible for paying the tax and is required to use a formula identical to the one above. The entertainer should ensure that included with the payment made by the venue is a copy of the form that the venue is required to file for each entertainer. This would allow the entertainer to ensure that the required 2% has been withheld from the payment. In contrast, a professional athlete in Missouri will not use the 2% withholding method. That is because the athlete is considered an employee and is paid by the team, not the venue while the entertainer is an independent contractor paid by the venue per appearance. Instead, the athlete will have their taxes withheld just as a regular employee would, and then would have the duty day method used to apportion the percentage of the tax that is owed to Missouri. Below is an example of how the two methods can produce different amounts of tax owed by the entertainer. In the example the musician has the same number of duty days and annual salary as the MLB player in the example above.

If the venue does not withhold the 2% from the compensation, then the entertainer is responsible for paying the tax and is required to use a formula identical to the one above. The entertainer should ensure that included with the payment made by the venue is a copy of the form that the venue is required to file for each entertainer. This would allow the entertainer to ensure that the required 2% has been withheld from the payment. In contrast, a professional athlete in Missouri will not use the 2% withholding method. That is because the athlete is considered an employee and is paid by the team, not the venue while the entertainer is an independent contractor paid by the venue per appearance. Instead, the athlete will have their taxes withheld just as a regular employee would, and then would have the duty day method used to apportion the percentage of the tax that is owed to Missouri. Below is an example of how the two methods can produce different amounts of tax owed by the entertainer. In the example the musician has the same number of duty days and annual salary as the MLB player in the example above.

Example 1: Venue withholds the tax

• $10 million / 200 total duty days = $50,000 per appearance
• $50,000 * 2% = $1,000 withheld per appearance in Missouri
• $1,000 * 10 performances in Missouri = $10,000 in taxes paid to Missouri

Example 2: Musician pays the taxes on their own

• 10 performance days in Missouri / 200 total performance days = 5% of performance days attributable to Missouri
• 5% (performance days in Missouri) * $10 million salary = $500,000 taxable income in Missouri
• $500,000 * 4.95% (the current top range for Missouri withholding tax in 2023) = $24,750 in taxes owed to Missouri

Here you can see that using the default duty/performance days method for calculating the Jock Tax would lead to a tax liability of almost 2.5x what the liability would be if the venue withheld the taxes. This is another example of why needing to have knowledge of the individual states and how they calculate the Jock Tax is critical, because knowing how each state calculates their tax can both potentially save you substantial amounts of money and help avoid issues with your tax payments.

Final thoughts
While the Jock Tax is most associated with professional athletes, the tax is far wider ranging than that. Artists, musicians, and other performers may all be subject to the tax and responsible for its payment. And because the tax varies from state to state, sometimes in minor ways and others in large part, trying to ensure that you are properly complying with the different tax laws can be incredibly difficult. So, any performer who is conducting business in multiple jurisdictions should consult with a licensed CPA or Enrolled Agent (which is an individual certified by the IRS to represent and advise on tax matters) before traveling for performances. These licensed tax professionals are trained and licensed to assist individuals with handling complex tax issues.

Editor’s Note
Read more about why the Nonresident Athletes and Entertainers Tax (A&E Tax) is of special interest to Missouri’s nonprofit arts organizations here, where you’ll also find venue withholding instructions.

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