Prohibition saw the rise of bootlegging by stoked-up cars capable of outrunning cops. Today, the NASCAR corporation, America’s best-known stock car racing program, is trying to get away from some state meddlesome agents.
Ohio’s tax commissioner Jeff McClain claims that NASCAR owes Ohio more than $549,000 for unpaid taxes. This is merely because Ohioans viewed NASCAR racing on TV. McClain says that money is due under Ohio’s commercial activity tax (CAT), a 0.64 percent levy on the gross receipts of any business that earns at least $1 million in the state. According to the Ohio Department of Revenue, the CAT is worth approximately $2 billion each year. This tax companies pay for “the privilege of doing business” in Ohio.
McClain was supported by the Ohio Board of Tax Appeals last year. NASCAR (based in Florida) appealed the decision to Ohio Supreme Court. They will be hearing the case later in the year.
NASCAR states it pays tax on revenues earned from Ohio-based events as well as direct merchandise sales to Ohio residents. NASCAR claims that the state’s claim to a portion of television revenue is “remarkable” and would allow it to “automatically apply CAT revenue from all revenue sources, including those of baseball teams in California, YouTube cats videos makers, and everyone in between.” According to NASCAR’s attorneys, this broad scheme would violate the Commerce Clause of the U.S. Constitution. It gives Congress all power to regulate interstate commerce.
In the aftermath of 2018’s ruling by the U.S. Supreme Court, the case represents the latest tax dispute. South Dakota v. WayfairThe case dealt with online retailers’ responsibilities to state sales taxes. Justices ruled that sales taxes could be collected from states if there was a substantial economic presence (or “nexus”) in the state.
It is difficult to define “nexus”, and Congress has yet to address the matter. Ohio claims taxes on NASCAR’s television revenues, which is an attempt to speed up a cross-country revenue push. The brakes should be applied by the state Supreme Court.