Derek Jeter Tax Case Distinct from “Jock Tax” Controversy

November 16, 2007

The new case that NY tax authorities are bringing against Yankee star Derek Jeter may sound like another case of the “jock tax,” but it’s quite different.

New York tax authorities already collect state income tax on Derek Jeter’s Yankee salary as part of the so-called jock tax, officially called the athletes and entertainers tax or just the non-resident income tax. Like other employees of sports franchises, it doesn’t matter where Jeter lives — he has to pay income tax on his wages to the state where he plays each game. As a result, travelling athletes file dozens of state income tax returns each year.

In effect, New York taxes Jeter’s entire salary, then credits him for making payments to other states when his team is on the road. The only states with a Major League Baseball team that refrain from taxing visiting players are Texas, Washington State and Florida. (Illinois only taxes athletes from states that tax their athletes, so it forgives the tax on visitors from these three states.) Every other state demands that each visitor file a state income tax return, declaring the income that was “earned” during the visit. Many cities add yet another layer of tax onto that.

In this new case against Jeter, New York is going after a share (maybe a 100% share) of the tax due on Jeter’s non-salary income. His tax liabilities on endorsements and other non-salary income do depend on where he makes his home. State rules vary, but many states count a person as a taxpaying resident if he spends over six months in state. If Jeter lives more than six months of the year in Tampa, as he claims, then he has a good case, no matter what how emotionally attached NY fans are to him or he is to them.

Here’s the silliest quote from the New York Daily News story about Jeter’s new tax woes:

“He has made numerous public statements professing his love for New York,” the state Division of Tax Appeals wrote in legal papers.

Hey, a lot of us love New York. That doesn’t mean Albany can claim a chunk of our income. Here’s another irrelevancy from the NY tax collectors:

“He keeps items near and dear in his New York apartment,” the lawyers wrote. “He became immersed in the New York community.”

What, are they trying to do — punish community involvement?

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