For years, states and localities have forced athletes and entertainers to pay local taxes on compensation earned for playing games or performing in the state.
But the Pennsylvania Supreme Court confirmed that taxing jurisdictions must play by the rules of the game. In National Hockey League Players’ Association vs. City of Pittsburgh, the court held that Pittsburgh was out of bounds because the city essentially sought to tax the “away team” more than the “home team.”
The Sept. 26 ruling was premised on the notion that Pittsburgh couldn’t impose a 3% tax on nonresident athletes and entertainers for performing services in the city when local athletes and entertainers only were required to pay a 1% tax on the same services.
But does this deliver the knockout blow for so-called jock taxes? Definitely not.
Often, the term “jock tax” is used to describe any tax that applies to athletes, including regular income taxes. Due to the publicity that surrounds professional sports, the amount of money athletes make, and the fact that their practice and game schedules are largely publicly available, state tax departments and legislatures can easily learn how much money athletes earn and where they earn it.
The increased attention professional athletes receive from states has, falsely, led players, teams, commentators, and some fans to cry foul over special jock taxes.
But nonresident professional athletes are subject to income taxation under the same general principles applied to all nonresident individuals who earn income in a state. Generally, athletes pay tax to any state in which they’re playing a game (expect for when the Steelers travel to Miami to play against the Dolphins, for example, because Florida doesn’t have a state income tax).
So the Pennsylvania Supreme Court’s ruling won’t affect this scheme of taxing nonresident athletes and entertainers. But what it will do is at least force and local taxing jurisdictions to make sure the taxes are fairly applied across the board.
Rules of Fair Play
What does this decision signal to state and local taxing jurisdictions who want to apply a “fair” jock tax that will stand up to scrutiny? The answer is somewhat simple: They need to ensure the tax doesn’t hit nonresident athletes harder than resident athletes.
In this Pittsburgh case, the disparate treatment was obvious—nonresidents were forced to pay a 3% tax rate, while residents of the city only paid based on a 1% tax rate.
But this message is consistent with that delivered by the last major court decision on local jock taxes, coming out of Ohio’s top court over 10 years ago in Hillenmeyer v. Cleveland Board of Revenue. There, however, the law disadvantaged nonresident athletes in a more discrete way.
Instead of making athletes pay tax at a higher rate than residents, the Cleveland tax forced the use of a methodology that inflated the overall amount of income the athletes had to apportion to the city when computing the tax due.
Specifically, the Cleveland tax forced the use of a “games played” method, which artificially increased the portion of income that was subject to tax under the Cleveland rules. That case caused the city of Detroit to revise its own computational method for its jock tax a couple of years later by mandating use of a “duty day” method instead of the “games played” method that was rejected by the Ohio courts.
Will we see a similar change to other local taxes in light of the Pittsburgh case? Probably not, but that’s because no other states or localities (of which we are aware) tax nonresidents athletes at a higher tax rate than resident athletes.
Still, the message to state and local taxing jurisdictions is clear: When crafting a tax that will hit nonresident athletes coming from other places, make sure the tax hits nonresidents and residents equally.
Game Plan for Athletes
At the most direct level, taxpayers who paid the Pittsburgh tax may have the chance to get some of their money back. City officials noted following the decision that the tax has brought in tens of millions of dollars in revenue for Pittsburgh since it was enacted. But nonresident athletes or performers that have paid the tax during statute of limitations period, which spans the last three years, could claim a refund for taxes paid.
More generally, however, this case is yet another reminder for athletes, entertainers, and their advisers of the consequences of making a lot of money and doing so in cities and states across the country. Most states and localities haven’t made the same mistake as Pittsburgh and haven’t crafted local taxes that are at risk of getting struck down in court.
Taxpayers and their advisers must be on constant alert for multiple levels of state and local taxes, since they aren’t going away. Sometimes, that awareness can lead to creative tax planning, as we saw with Shohei Ohtani’s deferred compensation strategy, which likely will save him tens of millions in state and local taxes on the historic contract he signed a couple years ago.
In most other cases, absent the unique constitutional issues presented by the Pittsburgh case, it’s more about being aware of and managing the state and local tax burden than avoiding it altogether.
The case is Nat’l Hockey League Players’ Ass’n v. City of Pittsburgh, Pa., No. 20 WAP 2024, decided 9/26/25.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Timothy P. Noonan is a partner at Hodgson Russ who focuses on state and local taxes and leads the firm’s tax residency practice.
Brandon J. Bourg is an associate at Hodgson Russ and a member of its state and local tax practice.
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