UT wants end to decades-long 'unfair' city tax

A $4.99 tax is clearly marked on Rick Tucker's tickets before the game against Troy earlier this month. The five percent amusement tax dates back to state legislation passed in the 1940s and applies only to Knox County. 
 (MICHAEL PATRICK/NEWS SENTINEL)

Photo by Michael Patrick, copyright © 2012

A $4.99 tax is clearly marked on Rick Tucker's tickets before the game against Troy earlier this month. The five percent amusement tax dates back to state legislation passed in the 1940s and applies only to Knox County. (MICHAEL PATRICK/NEWS SENTINEL)

Rita Webb has paid taxes to the city of Knoxville for nearly three decades without realizing it.

That's, in part, because she lives in Portland, Tenn. — 187 miles northwest of Neyland Stadium, where Webb has owned a pair of season tickets since the early 1980s.

In addition to the donations she has made for the right to purchase University of Tennessee football and women's basketball season tickets, the face value of those tickets and the more than 9 percent sales tax she pays each year, Webb has been forking over a 5 percent amusement tax. That additional tax tallies to roughly $1.75 on each of her $35 tickets.

Evelyn Brooks, left, scans the ticket of Rita Webb from Portland, Tenn., before the Tennessee game against Troy earlier this month. Webb said, "I thought all my ticket price went to the school." (AMY SMOTHERMAN BURGESS/NEWS SENTINEL)

Photo by Amy Smotherman Burgess

Evelyn Brooks, left, scans the ticket of Rita Webb from Portland, Tenn., before the Tennessee game against Troy earlier this month. Webb said, "I thought all my ticket price went to the school." (AMY SMOTHERMAN BURGESS/NEWS SENTINEL)

"I thought all of my ticket price went to the school," said Webb, whose son graduated from UT. "I don't live there, so I get no benefit from that and neither does the school. I don't think they should charge something for the city that everybody thinks is going to the school."

Webb isn't the only one unhappy about the tax she pays on tickets.

For decades the University of Tennessee has sought to eliminate the tax.

The university, however, does not want to lower ticket prices, said Senior Associate Athletic Director Bill Myers. Rather, UT Athletics want to keep roughly $1.5 million it's currently collecting on behalf of the city and county and use it toward planned construction projects and making up the $4 million budget shortfall the athletics department faced last year.

The tax dates back to state legislation passed in the 1940s and applies only to Knox County. The law has since been whittled down with exemptions over the years and now largely targets movie theatres outside the central business district and regular-season college athletic events in Thompson-Boling Arena and Neyland Stadium.

"We're the only entity in the state that pays this tax — I'm talking about university athletic programs," said Chancellor Jimmy Cheek. "Vanderbilt doesn't pay it, University of Memphis doesn't pay it, ETSU doesn't pay it. It's a state law that affects only Knox County."

It's an unfair tax, he said.

Among the Knox County venues exempt: concerts, postseason college games, high school games, any event charging less than $2 per ticket, any venue owned by the city, any event at World's Fair Park and any venue within the central business district.

Last year, the school collected roughly $1.5 million on behalf of the city and the county. Of the 5 percent, 4.5 goes to the city and half a percent goes to the county. The city uses the money to make payments on the Knoxville Convention Center, while the county uses its portion to pay for park upgrades, said officials.

Though the money is a small portion of the city's roughly $180 million general fund budget, it's revenue the city does not want to do without, said Knoxville Law Director Charles Swanson. If it disappears, he said, the city may have to raise other taxes to make up the difference.

City officials appreciate the value of having the university nearby and the economic stimulus that fans bring when they come to town, but it presents challenges that cost money to deal with, he said.

"We expect everybody who is trying to furnish services and trying to pay for their own bills to seek ways to increase their own income even if it's at the expense of someone else who needs it," Swanson said. "I guess we do the same thing to a certain extent, but we can't afford it. We can't afford to just have income sources just dry up."

Cheek said the issue would likely have to be addressed at the state level, and the university would not move forward without first speaking with the city. UT so far has done neither. Internally, however, the tax has been a common topic of discussion in recent months and years.

"That's a $1.5 million swing for us, and the city is not in a position to repeal that right now, but it's a pretty unfair tax on UT athletics and it's time to start letting people know that," then-Athletic Director Mike Hamilton told the athletics board at its spring meeting in 2011.

Myers, who is the athletic department's chief financial officer, said UT tickets are priced competitively with other Southeastern Conference schools. By including the tax in that overall competitive price, it puts UT at a disadvantage compared to what other schools are able to pull in.

"There are now 14 schools in the SEC, five of which don't pay any tax," Myers said, singling out Florida, Kentucky, Louisiana State, Arkansas and Texas A&M. "Right now, our tickets are competitively priced compared to Auburn, LSU and Alabama, and the taxes they are paying on tickets are less, and we keep eating the difference."

Swanson, however, insists tax code is nuanced and cannot be compared across city, county and state lines. "We don't think it's burdensome to the University of Tennessee, and I don't think people are buying season tickets to the University of Alabama because they're not willing to pay the 5 percent amusement tax on the University of Tennessee tickets — though they may be doing it because they don't see any defense over there (at Neyland Stadium)," he said before adding that he's a UT graduate and season ticket holder himself.

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NOT AMUSED

Annual amusement tax UT has paid the city and county over last five years:

Fiscal Year Amount

2008 $1,365,304

2009 $1,449,460

2010 $1,662,224

2011 $1,626,637

2012 $1,552,922

Total over last five years: $7,656,547

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Related:

Historical documents

A 2011 UT report on the amusement tax

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