Season tickets to marquee University of Minnesota sporting events come with the expectation of a donation to a school-run scholarship program. Now, the state is planning to take a cut, too — unless the university and its boosters can convince lawmakers to step in.
The move is prompted by a decision by the Minnesota Department of Revenue to count memberships, licenses and other required donations associated with athletic events as part of the admission price. The charges can run into the hundreds or thousands per seat per year, depending on the sport and the location of seats in the venue.
Under a notice issued in December, all those add-on costs — even if collected separately — would be taxable.
"Minnesota's law regarding the privilege of admission imposes tax on the entire sales price," Assistant Revenue Commissioner Jenny Starr told lawmakers on Thursday. "Sales price includes any price that is required to be paid to receive the privilege of admission."
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She said the department was clearing up ambiguity about a feature that has become increasingly popular during the recent stadium building boom. Sports teams and other entertainment venues are charging a premium for tickets that can result in memberships, access to exclusive lounges and meet-and-greets with performers or athletes.
The university says it diverts the ticket-related assessments to an athletic scholarship program.
In 2017, the university advised its season ticket holders that they can no longer deduct those donations from their income taxes under the federal tax overhaul.
The more recent Minnesota sales tax notice applies similarly to add-ons at theaters and performance halls. But because of a special exemption, the license fees people pay for the right to buy Minnesota Vikings season tickets aren't hit with the tax.
Sen. Paul Anderson, R-Plymouth, said that's not fair.
"We're allowing the exemption to happen for professional teams and we're looking at it — that's a good idea to be taxing student scholarship dollars? That's where I have a problem," Anderson said.
He's sponsoring the bill to provide an exemption for collegiate ticket purchases. First-term DFL Rep. Mohamud Noor, who represents the Twin Cities campus district, has the companion bill.
John Cunningham, deputy athletics director for the university, said Minnesota is the only state in the Big Ten Conference treating taxes on a scholarship seating program this way. He told the Senate Taxes Committee this week it will reduce what ultimately flows into the scholarship fund, which has lately been about $12 million.
"Based on the donation collected last season, we expect the sales tax to result in an additional $1 million cost to the athletics department budget," Cunningham said. "That's enough for us to fund near 37 full in-state scholarships."
Support for the plan at the Capitol isn't universal. Sen. John Marty, DFL-Roseville, said Minnesota's revenue agency got it right.
"Whether it's giving a 'donation' to a school, a scholarship fund as part of your ticket purchase, if you have to make that donation in order to buy the ticket, it's part of your ticket cost."
Marty said the colleges are at least putting the upfront fees to a noble cause.
"I think the collegiate folks are right to say, 'It's unfair that we have to pay it when they don't,'" Marty said. "But the unfairness isn't that they have to pay it. The unfairness is the professional folks don't have to pay it."