Mud Hens make pitch for state tax exemption

The Toledo Mud Hens did not pay sales tax on the purchase of a video board for Fifth Third Field, a move faulted by a state audit.

THE BLADE/JEREMY WADSWORTH
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The Toledo Mud Hens did not pay sales tax on the purchase of a video board for Fifth Third Field, a move faulted by a state audit.

COLUMBUS — The Toledo Mud Hens hope to score a sales-tax exemption from the state, clearing up uncertainty about the team’s status and wiping out an overdue tax bill exceeding half a million dollars.

The exemption would apply to purchases made by the nonprofit corporation, not to food, drinks, and souvenirs bought by fans.

“We have not been paying [sales] taxes since 1965, when the club was formed as an Ohio not-for-profit corporation,” said Joe Napoli, general manager of the Mud Hens and Toledo Walleye. “But because of the uniqueness of the corporation, we wanted to clear up any confusion. It also puts us on the same footing as the Columbus Clippers, which was structured the same way and is also exempt.”

The Toledo Mud Hens Baseball Club Inc., however, still has a dispute pending with the Ohio Department of Taxation over the club’s status dating back several years.

“The entity argued that they were a political subdivision and were exempt from the sales tax,” said Taxation spokesman Gary Gudmundson. “We ruled otherwise."

Because of that decision in January, 2010, the Mud Hens owed the state $553,389, including interest, for the years 2002 through 2005. That decision is under appeal with the Ohio Board of Tax Appeals.

“We were audited,” Mr. Napoli said. “The triggering event was a major purchase of the ballpark, a video board. Naturally, that gets attention. When you get a video board of 700-some thousand dollars, an item of that magnitude, there are questions about why you did not pay tax on that.”

The Senate Finance Committee on Tuesday added a provision to its version of the two-year budget at the request of Sen. Randy Gardner (R., Bowling Green), a committee member, and Sen. Edna Brown (D., Toledo).

Under the amendment, a nonprofit corporation leasing a county-owned recreational facility for a sports team or minor-league affiliate would be exempt from paying sales taxes on purchases. The narrowly drawn language would apply only to a team in Lucas County.

The change was one of hundreds that the committee adopted, with more still to come.

If the provision survives committee and full Senate votes next week, it would have to clear a joint conference committee that will would work out a compromise between the House and Senate versions. A spending plan must reach Gov. John Kasich by June 30.

This year’s budget debate began with Mr. Kasich proposing a broad expansion of the sales-tax base to include most professional services. His budget largely flipped the sales tax methodology on its head, assuming that something was taxed unless it is expressly exempted under law.

The exemption would apply to purchases made by the nonprofit corporation, not to food, drinks, and souvenirs bought by fans.

But the proposal was stripped from the budget by his fellow Republicans in the House, and now the House and Senate have begun adding more exemptions.

“There’s an awful lot of agreement here among people of different political persuasions that we need a thorough and regular review of existing tax breaks," said Zach Schiller of the left-leaning Ohio Policy Matters of Cleveland. “To me, creating a bunch of new ones for special interests flies in the face of that agreement.”

In addition to the Mud Hens language, the Senate version of the budget would also exempt products purchased by Ohio’s aerospace industry that is estimated to cost the state $7 million to $8 million.

“One of our largest employers in southwest Ohio is GE, which does a lot of aerospace,” Senate President Keith Faber (R., Celina) said. “They do things like jet engines, missiles, and other things as well. What it does is say that the products they consume in manufacturing inside the state are not considered for sales-tax purposes, but if you sell the item, it is sales-tax purposeable.”

Ohio is vying to become a test range for unmanned drones. Mr. Faber said that an industry revolving around drones could also be included.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.