SGMA Opposes Minnesota Proposal to Tax Sports Products to Fund Stadium

WASHINGTON, D.C. – May 11, 2006 – Attempting to fund the new University of Minnesota football stadium through a 13% wholesale tax on sports products is an unfair, inefficient and ultimately unworkable concept that should be rejected, according to the Sporting Goods Manufacturers Association (SGMA). In a letter delivered to the Minnesota State Senate and House delegates this week, SGMA outlined a series of objections to the pending legislative proposal.

The “Sports Memorabilia Tax” would be a wholesale tax on the broad array of sports licensed and sports-related consumer products sold in Minnesota. The list of taxed items would include sports apparel, trading cards, sports posters, basketballs, baseballs, baseball bats, footballs, ice hockey gear, team caps, and other sporting goods.

“The proposed wholesale tax is fundamentally flawed. The 13% proposed wholesale tax actually translates to close to a 25-26% increase at retail because retailers will include the tax as a cost of goods when determining a final sale price. In effect, a wholesale tax of this sort takes a lot more out of consumers pockets than it returns to the government to pay for the new stadium,” said SGMA President Tom Cove. “By definition, this is inefficient and inequitable.”

By taxing purchases made in Minnesota, a financial burden will be placed on thousands of people who may never step foot in this new stadium, which will be built in the greater Minneapolis area. Also, some state residents may cross the state border to purchase sports gear in nearby states, which hurts Minnesota-based businesses and lowers total sales tax receipts.

“By imposing such a tax, it could adversely affect sales at traditional brick and mortar retailers doing business in Minnesota,” continued Cove. “Right now, 5% of sports licensed products are sold through the Internet and 5% are sold through mail order. Those numbers will rise if that onerous tax is passed. Such news would hurt retail revenues and reduce the total income from the tax.”

Adding to the price of sports products, perhaps as much as 25%, will also attract counterfeit product to Minnesota. Pirating of sports products trademarks is already a significant problem nationally. Artificially increasing the price of legitimate products may serve as an incentive for criminals (who will not pay any tax) to flood the market with lower priced counterfeit products. Again, consumers suffer when they are sold defective products and Minnesota businesses suffer from lost sales.

Further, the tax unfairly targets sports products consumers.

“Since other special events will be held in this new facility, how do you generate revenue from those types of attendees to subsidize the construction of this new stadium?” asked Cove. “Taxing only the sports fans is hardly equitable!”

A copy of SGMA’s letter to Minnesota legislators can be found at www.sgma.com.

The Sporting Goods Manufacturers Association (SGMA) is the global business trade association of manufacturers, retailers, and marketers in the sports products industry. SGMA, owner of the Sports Research Partnership®, enhances industry vitality and fosters sports, fitness, and active lifestyle participation.
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