Extras on Excise: In the Name of Taxation, New York Clears the Way for Professional MMA to 'Strike' in the State

Earlier this year, the New York State Assembly passed S 5949, which legalizes and creates a regulatory regime for professional mixed martial arts and imposes a new tax on certain combative sports. The legislation became effective this month, when the new combative sports regulations were also finalized.

While New York has long imposed taxes on boxing, wrestling and sparring matches, the state made mixed martial arts (MMA) illegal almost 20 years ago, when the professional enactment of the sport was in its early stages. Today, MMA has been popularized by the Ultimate Fighting Championship (UFC) promotion company, which stages fights throughout the year at various locations both in the United States and abroad. Fighters battle for supremacy in the Octagon, the eight-sided fenced cage wherein UFC fighters clash, entertaining thousands of fans in person and millions more watching on pay-per-view, television broadcast or digital mediums.

The increased popularity and financial success of the UFC, and other MMA promotion companies like Bellator, has enhanced the potential for substantial tax revenue for New York, perhaps making legalization more palatable. Further, according to reports, New York is the only state in the union that currently bans MMA. The UFC has been very active in lobbying the state to allow professional MMA, even suing the state in both 2011 and 2015, and arguing that the statutory language purported to disallow professional MMA is unconstitutionally vague.

The amended law specifically classifies mixed martial arts as an authorized combative sport and also authorizes combative sporting events conducted under the supervision of the New York State Athletic Commission or an authorized sanctioning entity. In accordance with the new regulations, however, “professional contests or exhibitions of mixed martial arts must be conducted under the direct supervision and authority of the commission” only. All persons and entities involved, from promoter to timekeeper, must be licensed by the commission. Fighter and manager licenses are a mere $50 for a one-year license term, while promoter licenses, also issued for a one-year term, are based on the seating capacity of the fighting venue and range from $500 to $3,000. Other required professional MMA licenses and fees are as follows:

  • Timekeeper - $40
  • Second/Trainer - $40
  • Matchmaker - $100
  • Referee - $100
  • Judge - $100

Promoters also have significant insurance obligations should they wish to stage an event in New York, according to the new regulations. They must provide accident insurance coverage of at least $50,000 to each licensed professional involved in a sporting event and must provide coverage for “medical, surgical and hospital care” of at least $1 million dollars for the “treatment of any life-threatening brain injury” suffered by a licensee in a promoted event. Promoters must also provide coverage that will pay a death benefit of $50,000 to the estate of any licensed professional who dies due to injuries suffered in events the promoter has staged.

In addition to the licensing and insurance requirements, there will be a tax imposed on the tickets sold for combative sporting events held in New York, other than professional or amateur boxing, sparring or wrestling exhibitions or matches. The tax imposed is 8.5 percent of gross ticket sales to eligible sporting events, with no maximum tax. Given that gate receipts for UFC events featuring star performers frequently measure in the millions of dollars, New York tax revenue from ticket sales alone will be significantly more than was yielded from boxing and wrestling matches. In addition to the tax on gross ticket sales, there is a tax imposed on the total gross receipts from broadcasting rights and digital streaming for New York events at the rate of 3 percent. This tax has a cap of $50,000.

Professional or amateur boxing, sparring or wrestling exhibitions or matches will continue to be taxed at the rate of 3 percent of the gross receipts from ticket sales, up to a maximum tax of $50,000 for any exhibition or match. The gross receipts from broadcasting rights will continue to be taxed at the rate of 3 percent, up to a maximum tax of $50,000. However, unlike UFC and other combative sporting events, boxing, sparring and wrestling events will not be subject to the new tax on the gross receipts from digital streaming.

Due to the state ban, the UFC has never held an event in New York. This will be remedied soon, however, as the organization has scheduled an event in New York City at Madison Square Garden on Nov. 12, just two months after professional MMA was legalized in New York.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Will the stringent requirements to promote professional MMA events in New York limit the players to established promotion companies like UFC and Bellator?

With a free trial to Premier State Tax Library, practitioners have a single trusted resource that provides all of the tools and information they need to develop and implement the right tax strategies.