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Bill seeks to even the tax disparity between MMA and boxing in New York State

A general view of the exterior of Madison

A general view of the exterior of Madison Square Garden is seen during the UFC 205 event at Madison Square Garden on November 12, 2016 in New York City.  Credit: Newsday File/Ed Mulholland/Zuffa LLC

Tax parity won't set off wild debates by mixed martial arts fans on social media, and it certainly won’t help sell any pay-per-views.

But in New York State, those two words could be worth several millions of dollars.

MMA promoters pay 8.5 percent sales tax on gross ticket sales receipts. And it is uncapped, meaning the bigger the gate, the bigger the tax bill. Boxing and wrestling promoters are taxed at 3 percent, with a cap of $50,000. Bill A5593 in the State Assembly seeks to eliminate that discrepancy and tax cap by making all combat sports pay the 8.5 percent rate.

"Nobody's ever been able to give me a reason on why that's necessary. So, I would think from both a revenue perspective, and from a common sense fairness perspective, that everybody should be in about the same boat," said Assemb. Kenneth Zebrowski (D-Clarkstown), sponsor of the bill. "At this point it just seems sort of like a subsidy that's given to one sport when it's not given to the rest."

New York is the only state with a difference in tax rates between boxing and mixed martial arts. Both sports are sanctioned and regulated by the New York State Athletic Commission.

"You do a major boxing match in New York, you do a $20 million gate, guess what you pay in taxes: $50,000," said Lawrence Epstein, chief operating officer of the UFC. "You do a major MMA card in New York, you do a $20 million gate, guess what you pay in taxes: $1.7 million."

The UFC paid $1.5 million in ticket sales tax for UFC 205 at Madison Square Garden on Nov. 12, 2016, the first event in New York after MMA was legalized by the state earlier that year. That event, headlined by Conor McGregor, set a UFC record with a $17.7 million gate. 

Eliminating or just reducing the tax-rate disparity would create a significant increase in the cost of doing business in New York for boxing promoters. It has the potential to make promoters consider bringing their events -- and their economic impact to the state -- elsewhere. A similar situation arose when the MMA bill was legalized and required promoters of all combat sports to carry a $1 million insurance policy for the fighters. Yet boxing's total revenue more than doubled in the first two years since MMA was legalized, according to a report from Gov. Andrew M. Cuomo in December 2018.

“I don't think that bringing them up to a similar level is going to be the impetus for moving it to another state," Zebrowski said. "I just don't really see that. New York's big and a big market with a lot of sports fans. So if they want to make that argument, I'd like to see the data and I'm always willing to sit down and understand the business model of any New York business, but I don't know if it's totally realistic at this point.”

Top Rank, one of the major promotions in boxing, declined to comment for this story. DiBella Entertainment and Star Boxing, two prominent boxing promotions in New York, did not return multiple messages seeking comment.

The smaller boxing promoters are considered to be the group most likely affected by an increased tax rate. These promotions depend more on their ticket sales revenue. For larger scale promotions such as Bob Arum's Top Rank or Oscar De La Hoya's Golden Boy Promotions or Eddie Hearn's Matchroom Boxing, far more factors than a state's gate tax rate go into determining venues to house their events.

Epstein offered what he termed an "elegant solution" to balancing the rates while still keeping a competitive tax landscape for New York to host major events. He suggested mirroring New Jersey's rate of 6 percent for both sports. Sure, that would lessen the financial burden for the UFC -- and all MMA promoters, but it also would cost boxing promoters less money than being bumped up to the 8.5 percent uncapped tax rate paid for MMA events.

(Nevada, a popular destination for fight promoters, has an 8 percent tax rate for boxing and MMA events. California and several states considered major U.S. combat sports markets charge 5 percent.)

"It's about getting the right amount of tax revenue without losing big events," Epstein said.

Gov. Cuomo’s report said combat sports generated $7,576,163 in sales tax paid to the state, of which boxing events generated $807,949.

Both Epstein and Zebrowski understand this isn't the biggest financial issue facing the state as Gov. Cuomo looks to fill a $6.1 billion deficit that threatens funding for schools and health care. But Zebrowski drew on his experience to explain it.

“The budget is made up by a lot of $1 million, $2 million and $10 million numbers. This is not the biggest revenue generator or revenue issue that's going to be discussed in Albany,” Zebrowski said. "But I'll tell you, I have folks come into my office every day from different agencies … and you'd be surprised at how many folks are looking are staring down the face of a $2 million or $5 million or $1 million cut that's going to affect people."

Two different paths to change exist. The assumed revenue from an increase in the tax rate for boxing events could be part of the state’s approved budget in April. In that case, the Assembly bill -- and its corresponding bill in the Senate -- do not require a vote. If not included in the budget, it would be a matter of passing that legislation.

Boxing’s tax rate was lowered to 3 percent from 5.5 percent and the $50,000 cap was implemented in 1999. The disparity in tax rates was known at the time of MMA legalization in 2016. But, after nearly a decade of politicking, lobbying and debating, it hardly seemed like a showstopper in the final weeks as momentum shifted toward the bill reaching the Assembly floor for a vote.

“At the end of the day, we’re on the outside of the sausage-making process of creating legislation," Epstein said. “If we had a choice between the legislation that was proposed or nothing at all, of course, we’d choose the legislation."

As part of the UFC’s lobbying effort, then-chairman and co-owner Lorenzo Fertitta committed to promoting four events across the state in each of the first three years after legalization. In those three years, the UFC brought 12 total events to MSG, Barclays Center, NYCB Live’s Nassau Coliseum and venues in Buffalo, Albany, Rochester and Utica. The 13th event -- UFC 249 in Brooklyn -- is scheduled for April 18. Bellator MMA, owned by ViacomCBS, has promoted three shows in New York, and Professional Fighters League has hosted eight events.

“We delivered on everything we said we’re going to do,” Epstein said. “We’ve got a track record we can point to which is exemplary in every way.”

New York Sports