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« | Home | »

Will WWE fight the California State Athletic Commission over taxation of Wrestlemania?

By Zach Arnold | May 15, 2014

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Whenever the document dumps for future California State Athletic Commission meetings are released, I’m a sucker for pouring over the pages and looking at the fine print. There’s always a news story to be found.

The document dump for Friday’s CSAC meeting in Los Angeles is no exception. I want you to take a look at page 35.

In the dullest typewriter font, there is a breakdown of gate taxes that CSAC levies on boxing, kickboxing, MMA, muay thai, and pro-wrestling events. Section 18824 of the state’s Business and Professions Code spells out the following:

(2) A fee of 5 percent, exclusive of any federal taxes paid thereon, of the amount paid for admission to the contest or wrestling exhibition, except that for any one contest, the fee shall not exceed the amount of one hundred thousand dollars ($100,000). The commission shall report to the Legislature on the fiscal impact of the one-hundred-thousand-dollar ($100,000) limit on fees collected by the commission for admissions revenues during its next sunset review.

According to CSAC’s numbers for their July 2013-June 2014 Fiscal Year, here are the gate taxation numbers so far from live events:

Interesting to note that the commission has made $117,854.25 on fines and $188,650.00 on the TV tax. A vote at Friday’s LA meeting to confirm the Legislature’s raising of the TV tax cap from $25,000 to $35,000 is a fait accompli.

Why do these numbers matter? They matter because if it wasn’t for the taxation revenue coming in from WWE events, all hell would be breaking loose over the Athletic Commission’s financials right now. And who is paying the taxation bill? WWE is paying the bills, not other promoters.

What makes the situation a nuisance for WWE is the fact that they’ve went along with the request for taxation as a sunk cost. Paying a live gate tax plus a $35,000 TV tax for SummerSlam is the cost of doing business, right? But the thing is that the taxation by the Athletic Commission is from a state governmental entity that is in charge of regulating combat sports contests and wrestling exhibitions.

And in the case of the Athletic Commission, they aren’t actually regulating anything when it comes to the wrestling exhibitions. Athletic Inspectors aren’t drug testing wrestlers. They aren’t collecting licensing fees from wrestlers, timekeepers, promoters, matchmakers, doctors, and officials. All that is happening is your random athletic inspector is going to the box office of the arena where WWE is running a show at and collecting a receipt for the 5% tax to send to Sacramento.

In the case of WWE, they are the ones getting whacked with the 5% tax. You aren’t hearing reports about athletic inspectors going to all independent pro-wrestling shows in the state and collecting the 5% tax on the books. If the Athletic Commission had to send athletic inspectors to every pro-wrestling show in the state to collect the 5% tax, they would be losing a lot of money when it comes to equal enforcement of collecting tax revenue.

Which brings us to Wrestlemania in 2015 at the new 49ers (Levi’s) Stadium in Santa Clara County. Whether it’s WWE or the parties they are getting site fees from to host Wrestlemania at the stadium, they are going to be asked by the Athletic Commission to pony up a check of $135,000 to cover the 5% tax without any sort of regulation oversight.

$135,000 is a lot of money, even to Vince McMahon. Why should WWE allow themselves to be singled out for taxation by the Athletic Commission when this state regulatory body a) isn’t doing any actual regulation of wrestling exhibitions; b) isn’t collecting 5% tax revenue from other wrestling promoters in the state; and c) isn’t licensing any of the participants involved in an exhibition that they’re supposed to be regulating?

When the WWE and their business partners can make up to $10 million dollars for an event like Wrestlemania, paying the Athletic Commission $135,000 as a sunk cost for nothing in return is ridiculous. WWE has some very good attorneys at their disposal. If they don’t put up a fight in court over the Athletic Commission targeting them only for wrestling taxation, then the Athletic Commission will continue to rake in hundreds of thousands of dollars from their events while other wrestling promoters in the state avoid the 5% tax. Either tax all the promoters equally or tax none of them. What defense would Consumer Affairs have in court when challenged over the taxation of WWE only and not other wrestling promoters? If the WWE used the Athletic Commission’s own rules against them in court, what would Sacramento’s defense be?

And without the revenue from WWE events, the Athletic Commission’s current budget would look a whole lot worse.

Topics: Boxing, CSAC, MMA, Media, Zach Arnold | 4 Comments » | Permalink | Trackback |

4 Responses to “Will WWE fight the California State Athletic Commission over taxation of Wrestlemania?”

  1. rst says:

    I never seem to be a fan of taxes.

  2. Tomer says:

    If the WWE (a presumably ‘foreign’ business to CA) is able to demonstrate that they are solely being obligated to bear the tax burden (and no one in-state is being obligated to do so similarly), they probably can make a pretty strong case of the second prong of the Complete Auto Transit v. Brady test for a state and local tax to survive Interstate/Dormant Commerce Clause scrutiny, nondiscrimination between domestic and foreign businesses, being violated and therefore either compel the CSAC to actually apply the tax fairly or have it struck down by the courts.

    Another angle to go for, although it’s significantly harder to actually meet, would be the last prong of Complete Auto Transit, which is fair relationship to services provided, but since there’s been little litigation on that prong and pretty much all of the case law said that if a state does anything at all, you pretty much meet that criteria so the bar is quite low for a tax survive on that argument (unless CSAC/CA is literally doing nothing at all, which is highly unlikely to be met).

  3. rst says:

    One good thing about taxes,
    is if you make enough money to afford representation,
    you can pretty much not pay taxes.

    I dont know if rasslin is still that wealthy.

  4. The WWE just Pays the extortion money because the CSAC threatened to regulate them. That will cause blood test, no steroids, no chairs strikes in a fight etc etc

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