The Cost of ‘Walking the Lobby’ at the Super Bowl

The Cost of ‘Walking the Lobby’ at the Super Bowl

 

Rod Tidwell:                What am I doing here, Jerry? I feel like I’m 5 years late for the prom!

Jerry Maguire:             C’mon, come with me.

Rod Tidwell:                Nobody gives a damn about me being here.

Jerry Maguire:            We are going to go downstairs and walk through this lobby.  I want every media guy, every player’s rep, everybody, to see you for what you are - the best kept secret in the NFL. The most commanding wide receiver in the game. You are fast, fierce and wildly charismatic.  You are the man! You are the man! Are you ready?
 

Rod Tidwell:                Let’s do it!

And so begins the familiar scene in the movie “Jerry Maguire.” Tom Cruise as Jerry Maguire walks Cuba Gooding Jr.’s character Rod Tidwell through the lobby of the hotel during the NFL draft, as a way to show him off, build interest in him and generate draft offers.  As Gooding Jr.’s character says at the end – “I came all this way to walk a lobby.”  He was astounded at the impact - in more ways than he probably realized.

This weekend, a Who’s Who of sports, entertainment and business will descend upon Minneapolis, Minnesota. And while the country is focused on the big game between the Patriots and the Eagles, for those who attend the Super Bowl, the game is merely the grand finale to week-long party.  And nobody throws a part like the NFL. 

If you ever get a chance to go to a Super Bowl, it is one of the most exciting experiences you’ll ever have.  While the game is important, it’s the accompanying events that make it so special. For attendees who are there as part of a corporate package (FYI - the NFL reserves approximately 25% of all seats for corporate sponsors), it’s about navigating some amazing parties.  The typical Friday night event is a concert hosted by Budweiser.  Saturday night is all about getting into the DirectTV party.  And Sunday is the Official NFL Tailgate ticket that includes food, drinks and an intimate concert, which this year features Sting and Darius Rucker.

With such a bacchanal, you can be sure that there are some major tax issues at play. This year’s game will be quite the windfall for Minnesota, a state with a top state tax rate of 9.85% - one of the highest in the nation. It’s not just the players who have to be mindful of the rules of state sourcing. Some of the attendees are considered to be “working” in the state – even while they appear to be just partying.

Here’s how many of the attendees should think about the event:

The Players – Both the Eagles’ and the Patriots’ arrivals in Minneapolis were fully documented. The Eagles arrived on Sunday and the Patriots on Monday.  That one-day difference between arrivals can mean a lot in tax dollars. 

How does this work? It’s about the time the taxpayer spent earning income in the state. In this case, players were participating in media as well as in practices, from the moment their plane landed.  As a result, they will need to source the income they earn for all of those days. Since Minnesota has a higher tax rate than their home states, all players will pay a higher rate.  (Perhaps that’s the reason the Patriots chose to spend one day less for sourcing.)

Justin Timberlake – This year, Justin Timberlake will be taking centerstage for the Pepsi Halftime show. Despite his normal concert fees, Timberlake won’t be paid to perform (typical of many of the Show performers) - though the NFL will cover the associated Show costs.  Minneapolis will miss out on sourced income taxes from Timberlake. But don’t worry about Timberlake - he will definitely get paid in the long run. Typically, Halftime Show performers generally see a spike in downloads of their music and the resulting royalties.

Sports Players, Coaches and Entertainers – Wherever you are in Minneapolis this weekend, you will find sports figures, coaches and other entertainers at the various events.  The question is whether or not they are there for a business purpose. In terms of concerts and events, it is relatively straight forward – if they are being paid to attend, they need to source it to Minnesota. 

Corporate Executives – When we watch the game from home, we don’t always think about the fact that the crowd is filled with executives from corporations across the country. Many of them are hosting customers or being hosted - which means they are technically working in Minnesota.  Given the income levels of these individuals, state sourcing will be important.  For the time they are in Minnesota, it will count as a day in the state, which can have a long-range impact. While salary should be sourced on the current year’s days in/days out, these executives must also factor in these days in future years with regard to 2018 bonuses and equity award vesting. 

For many, attending the Super Bowl is a once in a lifetime opportunity. Given the executive status and income levels of many in the crowd, there will likely be significant tax ramifications for those attendees – even if they are there simply to “walk the lobby,”  à la Jerry Maguire.

 

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