Summary: An Arizona court held that the Arizona Cardinals owed Transaction Privilege Tax on facility fees it collected from ticket purchasers and passed onto the Arizona Sports and Tourism Authority because the fees constituted gross income and the team was not acting as an agent for the Authority.
In a recent Arizona Court of Appeals decision, the Court ruled that the Arizona Cardinals’ (the Team) collection of a Facility Use Fee from ticket sales constituted gross income that was taxable under both the state and City of Glendale’s Transaction Privilege Tax (TPT).[1]
How the Facility Use Fee Works
Arizona’s Sports and Tourism Authority (the Authority) promotes, and finances State Farm Stadium located in Glendale, Arizona. As part of the financing, a Facility Use Fee (Fee) is collected with the sale of tickets for events held at State Farm Stadium, including the Team’s home games. When fans purchase home game tickets to see the Cardinals, the Team collects the Fee from ticket purchasers. During an audit, the Arizona Department of Revenue identified that the Team had not been paying the TPT on the Fee from ticket sales.
What is Arizona’s Transaction Privilege Tax?
Arizona’s TPT is the state’s version of a sales and use tax; however, the TPT is fundamentally different than a standard sales and use tax. The TPT is a tax on the seller’s privilege to do business in the state and is generally measured by the gross income of the business. Importantly, the rate of tax can vary based on both the TPT classification of the business and the location of the transaction. Although sellers are allowed to pass the TPT cost to customers, the obligation to pay the tax remains with the seller. By contrast, sales and use taxes are generally considered consumption taxes imposed directly on the consumer when a good or service is purchased. Sellers with nexus act as collection agents for the state and can be held liable for the tax if they fail to properly administer that collection obligation.
The Cardinals’ Argument: Is the Fee Just a Pass-Through?
The Team argued that the Fee should not be considered gross income under the TPT since the Fee is not an expense incurred by the Team, but rather a pass-through item collected by the Team as an agent for the Authority.
The TPT classification at issue is the amusement classification, and gross income under the amusement classification specifically includes revenues derived from “admission or user fees.”[2] The Court concluded that the plain language in the broad definition of gross income includes the Fee as a user fee.
The Court’s Analysis: Defining Gross Income in Arizona
The Court explained that the Fee constitutes gross income to the Team, which then pays this amount to the Authority as a business expense incurred in the course of operating at the stadium. For example, the Court noted that the Team must pay the Fee regardless of whether it actually collects the corresponding amount from the ticket holder, such as in cases where tickets are distributed for free. Additionally, the Court emphasized that the agreement between the Team and the Authority explicitly states that there is no agency relationship between the parties.
Final Thoughts: Key Implications for Businesses and Ticket Sellers
Based on the analysis above, the Court held that the Team is liable for both the state-level TPT and the City of Glendale’s TPT on the Fee it collects. This decision highlights the importance of understanding how each line item on an invoice is treated for tax purposes, whether under the TPT or a more traditional sales and use tax. It’s important to note that an amount collected from a customer that is intended to be passed along to a third-party does not, in itself, necessarily warrant exclusion of such amount from the tax base.
[1] Arizona Cardinals Football Club, LLC v. Arizona Dept. of Revenue, 1 CA-TX 24-0003, December 11, 2025.
[2] AZ Rev. Stat. Ann. §42-5073(A)
