Missouri’s Nonresident Entertainer Tax

Jul 05, 2023 | Financial Matters,

by Sue Greenberg, executive director

Like most other states, Missouri requires visiting entertainers and professional athletes to pay state income taxes. The tax, known as the “jock tax” in the sports world, is of special interest to nonprofit arts organizations not only because its proceeds should be funding the Missouri Arts Council but also because presenters are required to withhold 2% when nonresident entertainers perform in their venues.

THE EXASPERATING ALLOCATION GAP
By statute, 60% of the Nonresident Athletes and Entertainers Tax (A&E Tax) should be allocated to the Missouri Arts Council Trust Fund. But the tax, which has been collected since 1994, has never been distributed as intended. In FY24, for example, the Missouri Arts Council will receive $10 million — less than half of the estimated $22.7 million that was collected. Missouri Citizens for the Arts and other arts advocates perennially argue that this earmarked revenue stream should not be used to cover other state expenses.

VENUE WITHHOLDING
Missouri presenters — both commercial and nonprofit — must withhold 2% of the gross compensation paid to nonresident entertainers — corporations (including nonprofits), limited liability companies, partnerships, and independent contractors/sole proprietors — who perform in their venues. No withholding is required if payment to the entertainer is less than $300.

The definition of nonresident entertainer is quite broad. According to the statute, a nonresident entertainer is a person or group who performs for compensation any vocal, instrumental, musical, comedy, dramatic, dance or other performance in Missouri before a live audience and any other person traveling with and performing services on behalf of a nonresident entertainer(s).

A performance does not include a presentation for educational purposes, such as a lecture, when no admission fee is charged. If a performer provides both instruction and entertainment, the contract should split the compensation on a reasonable basis and withhold the tax for the entertainment portion.

There are two forms needed to comply with the remittance of the A&E tax. The first, Form MO-2ENT Statement of Income Tax Payments for Nonresident Entertainer, provides information about each entertainer, including name, address, type of business entity, and income subject to the tax. Copies of this form must be given to the entertainers and sent to the Missouri Department of Revenue.

The second form, MO-1ENT Income Tax Payments for Nonresident Entertainers, which is filed on a quarterly basis, reports the total amount withheld by the presenter. If payment to an entertainer is made over two quarters, the presenter can wait until the second quarter to report the withholding.

To avoid unpleasant surprises, entertainers and agents who are not familiar with the Missouri’s A&E Tax should be told about the requirement during negotiations, not when they are handed their checks. Contracts should include a clause addressing the withholding (see the example below).

Some nonresident entertainers try to avoid paying the tax by including provisions in their contracts stating that no taxes can be withheld from their fees. Clauses stating otherwise should be crossed out and initialed. Likewise, presenters should not agree to add the additional 2% to the entertainer’s total fee. Doing so would, of course, pose a calculation problem. More importantly, it was not the intent of the legislature to increase production costs for presenters.

SAMPLE CONTACT CLAUSE
Section 143.183.1 of the Revised Statutes of Missouri provides for a 2% tax on compensation if the amount exceeds $300 paid by a venue in Missouri to a nonresident entertainer as defined in the statute. The statute requires the venue to withhold 2% of the compensation as a prepayment of the tax. Accordingly, from the compensation payable under this contract [Arts Organization] will withhold the 2% and will remit it to the Missouri Department of Revenue. No additional compensation will be allowed as the result of [Arts Organization’s] withholding obligations.

GET ASSISTANCE
This blog provides general information; it should not be utilized as a substitute for professional legal and/or accounting services. If you need assistance, contact Kansas City Volunteer Lawyers and Accountants for the Arts or St. Louis Volunteer Lawyers and Accountants for the Arts.