NFL Rams Take a Big Hit From Missouri Supreme Court

JEFFERSON CITY, Mo. (CN) – The Los Angeles Rams took a big hit Tuesday when the Missouri Supreme Court ruled that their St. Louis incarnation could be liable for hundreds of thousands of dollars in state taxes.

The ruling overturned an administrative commission decision, which found that the Rams were entitled to a refund of state taxes paid, plus interest, from Feb. 1, 2007 to Jan. 31, 2010. St. Louis news outlets reported that the tax bill could be more than $375,000.

The Rams, who have not had a winning season since 2003 and went a combined 15-65 from 2007 to 2011 (the worst 5-year stretch in modern NFL history), received NFL approval to move from St. Louis to Los Angeles despite St. Louis’ offer to publicly finance a $1 billion stadium on the Mississippi River.

Rams owner E. Stanley Kroenke, a native Missourian, torched the city’s economic reality in a report to the NFL made public on the eve of the NFL’s vote, but that didn’t stop him from asking St. Louis suburb Maryland Heights for millions in tax relief to build a new shopping and entertainment district there.

The Rams’ team value more than doubled to $2.9 billion with the move back to Los Angeles, according to Forbes.

Meanwhile, the city was left with millions of dollars still left to pay on the Rams’ former home, the Edward Jones Dome, as well as the $16 million it spent – at the urging of NFL officials – to make its failed stadium proposal a reality.

The City of St. Louis, St. Louis County and the St. Louis Regional Convention and Sports Complex Authority sued the NFL in April this year, claiming the league violated its own relocation guidelines in search of the extra money it foresaw from allowing the Rams to move from St. Louis to the bigger media market in Los Angeles.

The Rams filed for a refund of St. Louis’ “entertainment license tax” (ELT), a 5 percent tax on ticket sales.

The Administrative Hearing Commission found the ELT was an occupational tax because it required the Rams to obtain a license to conduct the business of charging admission to professional football games, and as a condition of maintaining the license, to pay a portion of gross receipts to the city through the ELT.

The commission determined the taxing statute was ambiguous and construed it against the state director of revenue, finding, in both cases, that the director attempted to impose a tax upon a tax.

The commission also found the Rams were not liable for sales tax based on the ELT collected and remitted from February 2010 through January 2013.

But the state director of revenue argued that the commission erred in finding the portion of the ticket sales the Rams used to pay the ELT was not subject to sales tax. The director contended the ELT was included in the amount ticket purchasers paid for admission via the fixed ticket price charged by the Rams.

“This Court disagrees with the Rams’ interpretation of the stipulation and the Commission’s reliance upon that interpretation,” Judge George W. Draper wrote for the en banc state supreme court. “No language in the stipulation or the Commission’s finding resolves whether the ELT was included in the price of admission or whether it constituted a separate charge, especially when there is no dispute the Rams passed their obligation to pay the ELT through to ticket purchasers. Ticket purchasers paid a fixed dollar amount to gain admission to football games. Had the ticket purchasers declined to pay the fixed price the Rams charged – in effect declining to pay the ELT – it stands to reason the Rams would not have issued tickets to those purchasers or allowed them to be admitted into the football game, despite their assertion the ELT was not necessarily paid for admission. Hence, the Rams structured the collection of the ELT in such a way that it was included in ‘the amount paid for admission’ as contemplated under section 144.020.1(2).”

The supreme court also rejected the commission’s finding that the ELT was ambiguous and amounted to a tax upon a tax.

“In this case, the sales at retail occurred between the Rams and ticket purchasers who paid a fixed admission price to view football games,” Draper wrote. “Hence, ‘these are the transactions upon which the gross receipts are based and upon which the sales tax should be calculated.’ … The Rams received a fixed dollar amount from ticket purchasers seeking admission to football games, which included the ELT. Accordingly, the total amount the Rams received from the ticket purchasers is subject to sales tax and does not constitute a tax upon a tax.”

Chief Judge Zel M. Fischer and Judges Paul C. Wilson, Mary Rhoades Russell, Patricia Breckenridge and Laura Denvir Stith concurred. Judge W. Brent Powell did not participate.

The court remanded to the commission, with instructions.

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