Oklahoma addresses state PPV tax

April 11, 2012

State Impact reports on the current status of MMA in Oklahoma.  You may recall that Zuffa threatened litigation due to the state’s 4% tax on PPV purchasers within the state.

ESPN’s Josh Gross reported early last week that Oklahoma was back in business and accepting MMA promoter applications.

A little background on the subject via State Impact:

The Oklahoma State Athletic Commission doesn’t receive any state funding, and its entire budget depends of fees and licenses for combat sports events. The commission licenses professional fighters and promoters, enforces health and safety rules and oversees fighting exhibitions and competitions.

The State Impact article reports that in 2011 64% of its revenue is generated from the PPV fees. 23% of its revenue were from live fights within the state. Chart via the Oklahoma State Athletic Commission.

The Oklahoma Attorney General is reviewing the constitutionality of the law.  As a result, Zuffa is holding off on filing a lawsuit until the AG makes its decision.  Thus, this appears the reason why the commission continues to operate.

As of right now, SB 1533 – known as the “Oklahoma State Athletic Commission Act” – would provide the commission with $200,000 in hopes of quelling a potential lawsuit from the UFC.  The money would make up for the amount it would receive from the PPV payouts.  The bill passed the House of Representatives Appropriation and Budget Committee.

An interesting sidenote as most of the PPV generated in the state is from pro wrestling PPVs and not the UFC.  Yet, there has not been public lobbying from the WWE (or TNA) about the tax.

Payout Perspective:

SB 1533 passed preliminary committee with no opposition so if passed, it appears that the resolution may suppress a Zuffa lawsuit.  Yet, it will be interesting to see the outcome of the AG’s decision on the constitutionality of the PPV tax.  We will see if Zuffa presses the AG for a decision regardless of SB 1533 as a means to quash any further state taxation on PPVs.

10 Responses to “Oklahoma addresses state PPV tax”

  1. BrainSmasher on April 11th, 2012 9:19 PM

    I dont see how they were able to get by with that kind of tax. If you are the UFC you dont want states who get funding looking at this as an option. It is the UFC fan base who gets punished when they may not be recieving any of the rewards of live events. How many PPVs are lost because the extra expense of this tax? I dont see how you can single out fans of a brand or sport like that.

    Live events in OK should be able to fund regulation. There is no reason it costs the commission that much money is suck a small MMA state to regulate the sport. It can get by with half that cost until it grows. Like everyone they just have their hand out and runnign the opperation as expensive as they can knowing someone will have to cover the expense.

  2. Matt C. on April 12th, 2012 1:18 AM

    I’m glad to see the whole story on this coming out. Originally when websites started jumping on this story very little information was reported with it and people started filling in the blanks wrongly. I tried to ask questions on several different websites to understand how exactly this tax was working because it didn’t sound like a fair tax to me. So it’s good to see that the Oklahoma Attorney General is reviewing the constitutionality of the law.

    Thank you for following up on this and getting the facts out there.

  3. Derek on April 12th, 2012 3:43 AM

    The first comment…..you obviously have no knowledge of how big MMA is here in Oklahoma

    I live here, and live events of 2500+ sell out all the time with people left clamoring on craigsliat trying to find tickets,its very very rare that an event doesnt sell out anymore, wether its local fights, KOTC fights, etc, so by no means is this a “small mma state” in fact Oklahoma had the 2nd highest attended “fight night” in ufc history until that australia card here awhile back

    while I dont fully understand how they can do this, if dana really cared about furthering the sport, he would let it go, ive seen the breakdown of actual numbers elsewhere, its like $80,000 a year, if I had a business that was worth $1billion+, id let it go cause we have some great fighters from OK, never know when your next big star could come from

  4. Diego on April 12th, 2012 6:57 AM

    I’m not a constitutional lawyer, but I thought states had the right to impose taxes on economic activity. What is the basis for calling this unconstitutional? States impose sales taxes on any number of products at their discretion, is the sale of a PPV any different from the sale of an appliance?

    Not that I’m for taxes – personally I think this sucks – but I was under the impression that Oklahoma was well within it’s rights to impose a tax, arbitrary though it may seem.

  5. Machiel Van on April 12th, 2012 7:10 AM

    Seems like a tax that would just encourage piracy.

  6. BrainSmasher on April 12th, 2012 1:22 PM

    Derek

    Im glad you responded. You are right i wasnt aware of the popularity of MMA in OK. That is because the commission and the promoters there paint a picture that there is few fans and all the promotions are on the verge of going bankrupt.

    If the sport is as healthy as you claim then they should tax the promoters more or tax the ticket sales more. But they claim a tax would put them under. Either the sport there is big enough to handle the tax or it is to small to warrent such expensive regulation. Either way a sepperate industry should not be held responsible to cover the cost.

    Regulating the sport doesnt have to be a half million dollar a year process that it is in OK if they dont have the means to pay for it. WV commission runs on 10-20,000 per year. That is a little extreme but it shows it is possible. They dont get funding or tax tickets. I believe they should tax tickets and im sure the promoters would complain even though they make a ton of money. The commission needs to tax the tickets and promoters license more and cut spending. Taxing ring sports PPVs is not right. Whats next taxing NASCAR fans and making them pay for paving the states roads? Tax the ones going to the events not the people who are not going to the events. Thats all im saying. Im glad OK MMA seems to be doing well. But your commission is either greedy or incompetent and need to work within the budget they have without shady taxes on unsuspecting people.

  7. Nick on April 13th, 2012 4:50 AM

    This is different from other states where they tax events that they are regulating. This sets a pretty dangerous precedent by imposing a very high tax on an event that isnt even in their jurisdiction for the “good of the sport”. What will probably happen if this is implemented is that the price of PPV will go up 4% for Oklahomans.

  8. BrainSmasher on April 13th, 2012 9:23 AM

    It is already implemented. But if allowed to continue all the other states may start doing it and we all pay a tax on events. They could also raise the tax when ever they need more money. Imagine paying 70 for a PPV so a promoter in the other size of the state can fill his pockets on a live event you didn’t even go to.

  9. Jason Cruz on April 13th, 2012 12:11 PM

    @Diego

    We will have a post about this in a couple days. I believe Florida had a similar tax which was struck down.

    Jason

  10. Bruce on April 13th, 2012 7:33 PM

    This tax is suspect since the state is taxing events which are only transitory within its borders and do not actually originate there. This is potentially a violation of the dormant commerce clause, which prohibits states from imposing regulations which unreasonably burden businesses trying to operate through that state though not necessarily in it.

    I recall a case from law school which involved a state creating very specific requirements on appearance of trucks passing through the state. Scotus struck the law down as unreasonable interference with interstate commerce because the trucks would have to stop at the state border, refurbish their truck to comply with the laws, and then change the truck back when they left the state… Not sure if this situation would be directly analogous to that one, but the transitory nature of the PPV broadcasts may hold weight for the court. I believe OK is in Constitutional violation.

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