Is There Legitimacy To The Success Of No State Tax Teams?

After the Florida Panthers solidified their position atop the NHL for the second straight season, they added yet another year of the Stanley Cup residing in Florida.

Four of the last six NHL championships were via a team from Florida, with the Tampa Bay Lightning going back-to-back in 2020 and 2021.

In between Florida and Tampa’s back-to-back championships were the Vegas Golden Knights and Colorado Avalanche.

Now, what Florida and Nevada both have in common is not only their ranking as vacation spots but also the lack of a state sales tax.

That being said, this ability to take home a higher portion of your paycheck has been the case for much longer than 2020.

So, is this just a coincidence? Or have these teams finally begun utilizing their geographical advantage to recruit free agents?

To understand the difference between these contract opportunities, it is important to understand the way NHL contracts work.

While the home state of a player is important to their contractual earnings, it is not the only factor in their paycheck.

The first important note is that none of these details pertain to federal income tax.

Secondly, since only about half of the player’s games are played in their home state, NHL players abide by a term called the “Jock Tax”.

The Jock Tax is the unofficial name given for income tax levied by states and cities, claiming that since the athletes performed their job duties within their state jurisdiction, they should pay the taxes to the area in which the game took place.

These taxes only impact the Average Annual Value of the contract, excluding signing bonuses and performance incentives, unless it is an incentive that is accomplished all within a different location.

Canadian teams follow a similar model, with a slightly lower Federal Rate, but an increased Provincial Rate as opposed to the US states on the higher end.

With this basic understanding of how the player’s contracts are taxed, the anecdote is usually mentioned when a player is choosing a location. But how significant is the drop off between the contract seen on Twitter, and what the athlete actually brings home?

And, is it notable enough for a player to alter their decision?

Let’s take the Stanley Cup Champions’ most notable free agents as an example.

In what could be seen as the start of their transition as an organization, the Panthers signed Sergei Bobrovsky to a seven-year, $70 million contract in 2019. This was one of the largest contracts given to a goaltender at the time.

After transferring some of the AAV to a signing bonus in years past, Bobrovsky will earn $5 million as a base salary and $1 million as a signing bonus, making them both taxed as a resident of Florida.

This means roughly, Bobrovsky will take home $3.78 million of that $6 million in 2025, which is about a 63% take-home percentage.

Bobrovsky earned this contract after leading the league in shutouts the year prior with the Columbus Blue Jackets.

If hypothetically Bobrovsky were to have stayed in Ohio for the same contract, he would only walk home with $3.42 million instead of $3.78, due to the 6% state tax between Ohio and Columbus.

While that may not seem like a lot, let’s look at Tanner Jeannot, who has seen the highs and lows of state income taxes.

Playing his career for the Nashville Predators, Tampa Bay Lightning and Los Angeles Kings show a perfect example of an unexpected pay cut for a player.

In 2024, amid his two-year, $5.3 million contract with the Lightning, he was shipped to the Kings.

While the level of competitiveness did not change for Jeannot, his paystubs did. With the same yearly contract, Jeannot brought home $2.94 million while on the east coast, and $2.32 million while on the west. This California state tax level of 13.3% now had less than 50% of his contract coming home to him.

The biggest example of this highlighted the decision of Mitch Marner, who was expected to be the largest free agent signing of the 2025 offseason.

Instead, a day before NHL free agency began, the winger will be heading to the Vegas Golden Knights in a sign-and-trade deal.

Marner signed an eight-year, $96 million contract, with $60 million coming as a signing bonus. Just this year, Marner will collect $9.45 million of the $15 million coming between the signing bonus and salary.

If Marner were to sign this same contract to stay in Toronto however, his “hometown discount” would be going towards the 53.53% statutory top marginal tax rate in Ontario. So, only $7.05 million would be reaching Marner’s bank account instead of $9.45.

Suddenly, it is understandable why the tax rates of a city or state are a deciding factor on where to play.

All of these figures come with the caveat that these equations are largely simplified, and do not take into account all of the legal strategies and loopholes taken to not pay such exuberant amounts.

However, as the free agency period opens up on July 1st, this factor is at least something to note when a team is deciding between a handful of teams.

Will this continue to be a useful advantage for the no-income tax states?

And if so, should more adjustments be made to the salary cap during the next CBA negotiations, to ensure these teams do not continue to separate themselves from the rest of the league?