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April 13, 2021

Ohio Board of Tax Appeals upholds Commercial Activity Tax assessment sourcing portion of NASCAR broadcasting revenue to Ohio

In NASCAR Holdings, Inc.,1 the Ohio Board of Tax Appeals (BTA) held that a taxpayer's (NASCAR's) broadcast revenue attributed to Ohio viewers was sourced to Ohio for Commercial Activity Tax (CAT) purposes, not to NASCAR's state of domicile.

NASCAR is headquartered in Florida and sanctions auto races at tracks in the US and abroad. The Ohio Department of Taxation (Department) performed a CAT audit on NASCAR for July 1, 2005 through December 31, 2010. NASCAR was assessed on various revenue streams, but the BTA focused on the sourcing of broadcasting revenues from the taxpayer's agreements with various media outlets to air NASCAR races.

NASCAR sourced all its broadcasting revenues to Florida. For part of the audit period, the Department's auditor used Nielsen data to source a portion of the broadcast revenues to Ohio based on the Ohio audience. The Nielsen data was not available for the later part of the audit period, so the Department used Ohio's percentage of the US population. NASCAR appealed the assessment to the BTA.

In testimony before the BTA, the Department's auditor indicated that the results under either method were "pretty similar." The BTA noted that other ratings information may have been available, but NASCAR declined to provide it to the Department during the audit.

The BTA first analyzed which sourcing statute applied. The Department had applied Ohio Rev. Code 5751.033(I), which sources receipts from services and receipts not otherwise sourced elsewhere in the statute based on the purchaser's benefit received in Ohio. NASCAR argued that the Department should have applied Ohio Rev. Code 5751.033(F), which sources receipts from the right to use trademarks, trade names, patents, copyrights and similar intellectual property in Ohio. The BTA agreed with NASCAR that Ohio Rev. Code 5751.033(F) was the correct statute to apply and modified the assessment, rejecting NASCAR's motion to vacate the assessment for applying the incorrect statute.

Having determined that Ohio Rev. Code 5751.033(F) applies, the BTA noted that NASCAR's broadcasting revenue had to be sourced based on the purchaser's use, or right to use, the intellectual property in Ohio. The BTA rejected NASCAR's argument that sourcing its broadcasting revenues to Florida was reasonable because it granted its purchasers a non-divisible right to broadcast to a wide territory, not specifically Ohio. The BTA agreed with the Department that this argument ignored the fact that Ohio was included in that territory so that the purchasers of the rights obtained the right to use the intellectual property in Ohio.

The BTA then turned to NASCAR's arguments against the Department's sourcing methodology. NASCAR argued that sourcing based on Nielsen ratings or Ohio population overstated Ohio usage as that data did not consider areas beyond the US. The BTA declined to reject the Department's sourcing methodology on the ground that NASCAR had more detailed viewership information in its possession but did not provide it during the audit. The BTA also rejected the taxpayer's assertion that the Ohio Supreme Court's recent decision in Defender Security Co.2 should be considered, reasoning that the sourcing rules under Ohio Rev. Code 5751.033(I), and not Ohio Rev. Code 5751.033(F), applied in that decision.


It is unknown at this time whether the taxpayer will appeal the BTA's decision to the Ohio Supreme Court. If appealed, the case would be the first to be considered by the court on the application of Ohio Rev. Code 5751.033(F). A court decision may shed additional light as to what falls within the scope of the terms "trademarks, trade names, patents, copyrights and similar intellectual property" for the purpose of sourcing revenue subject to CAT. In that case, it will be interesting to see whether the court would apply, or distinguish, its holding in Defender Security to the taxpayer's facts.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Bill Nolan (


1 NASCAR Holdings, Inc. v. McClain, BTA Case No. 2015-263 (April 5, 2021).

2 Defender Security Co. v. McClain, Slip Opinion No. 2020-Ohio-4594 (The Ohio Supreme Court, applying Ohio Rev. Code 5751.033(I), held that a company's receipts from the sale of customer contracts are sourced to the out-of-state physical locations where the purchaser received the benefit of the purchased contracts (see Tax Alert 2020-2388)).