Fans of Major League Baseball will soon be getting their fix of afternoon baseball as they start the countdown to the first pitch on Opening Day. As is MLB tradition, players and fans alike are making their way to Arizona and Florida for Spring Training with the Cactus and Grapefruit Leagues, respectively, set to get under way in the coming days. The tax implications and overall economic impact will be felt throughout the league and the states in which they play.
When it comes to state income taxes, professional athletes establish residency in one state and are taxed by each other state relative to the number of “duty days” they spend there. In a general sense, these include game days, practice days, promotional events and any other days that would be considered as “rendering services” for their respective teams. For players whose team’s Spring Training facilities reside in Florida, they are not subject to any Florida state income taxes because Florida does not have a state income tax. The fifteen teams who choose to prepare for the season in Arizona are also in luck as Arizona does not count duty days until the team’s first regular season game. Please note players are still subject to income taxes in their resident state during spring games. However, if proper tax planning is considered players can be domiciled in states which do not have an income tax and be free of state income taxes for Spring Training.
Aside from your favorite players saving on taxes, the overall impact Spring Training has on the state economies of both Arizona and Florida cannot be understated. For six weeks of preseason, thousands of jobs are created to help run and maintain the facilities and ensure that fans have the memorable experience that America’s pastime is famous for. Fan attendance in the Grapefruit and Cactus League increased by 37% overall in 2023. Fans converge from all over the country and the world, generating exorbitant amounts of revenue in the local communities of Arizona and Florida that would otherwise never be possible without the presence of professional baseball.
For example, Palm Beach County is home to two complexes and hosts four teams: the Miami Marlins, the St. Louis Cardinals, the Houston Astros, and the Washington Nationals. Palm Beach County levies a 6% Tourist Development Tax on all short-term rentals where rent or accommodation charges are collected. According to an analysis of economic impact in Palm Beach County, Spring Training created an estimated 55,200 room nights in hotels, vacation rentals and other paid accommodations. That’s roughly $20 million brought in solely from the tax on short-term rentals. Overall, the economic impact produced by visitors and teams from MLB Spring Training was nearly $80 million. Meaning, on average, Spring Training generated $13 million per week. A survey conducted of ballpark visitors was able to determine that 92% of guests in attendance were planning on returning in future years, meaning Spring Training baseball has been and will continue to be a consistent revenue stream for years to come in Palm Beach County.
Once “duty days” kick in on Opening Day, considering the variances in income taxes from one state to another, professional athletes always find themselves in the middle of complex tax situations. Athletes such as Derek Jeter, have found themselves in tax disputes with states like New York regarding residency while trying to take advantage of the income tax savings in Florida. The onset of a new season is exciting for all involved, but athlete’s agents and financial advisors should make it a point to discuss with their clients the importance of tax planning ahead of the season, so they find themselves in the best position to carry out their tax obligations and minimize their tax burden.
Author: John Heintz | [email protected]
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