Ohio’s Taxman Is Tailgating NASCAR

Prohibition was a time when souped up cars could beat the cops and made it possible to bootleg. The NASCAR corporation, America’s best-known stock car racing program, has also been trying to escape some state meddling agents.

Ohio’s tax Commissioner Jeff McClain claimed that NASCAR owes Ohio $549,000 more in unpaid taxes because Ohioans saw NASCAR races live on television. 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 claims it is subject to tax for revenue from Ohio events and direct sales of merchandise to Ohio consumers. NASCAR alleges that the state is trying to take a cut of TV revenue. It claims this “remarkable situation” would automatically apply the CAT for revenue such as revenue earned by baseball teams in California or YouTube creators of cat videos and all other related revenue. The court was told by NASCAR lawyers that this vast scheme is against the U.S. Constitution’s Commerce Clause. This clause gives Congress sole authority to regulate interstate commerce.

This case follows the 2018 U.S. Supreme Court ruling. South Dakota v. WayfairThe case dealt with online retailers’ responsibilities to state sales taxes. A state can collect sales tax on a company with significant economic presence or “nexus” in a state even though the business does not physically exist there.

It is difficult to define “nexus”, and Congress has yet to address the matter. Ohio seeks to increase cross-country revenue by claiming tax on NASCAR’s TV revenue. The brakes should be applied by the state Supreme Court.