Cincinnati Reds notch offseason victory | Ohio Supreme Court’s groundbreaking decision finds promotional items exempt from Ohio sales & use tax.

Baseball helmet, bat, glove and ball on grass in brightly lit outdoor stadium. Focus on foreground and shallow depth of field on background with copy space. Fictitious background stadium created entirely in Photoshop.The Cincinnati Reds notch an offseason victory, as the Ohio Supreme Court rules that bobbleheads and other promotional items are resold as part of ticket purchase making them exempt from Ohio sales / use tax.

The Court quoting longtime Reds radio announcer, Marty Brennaman, “this one belongs to the Reds.” In a groundbreaking decision reversing the Ohio Board of Tax Appeals, the Ohio Supreme Court held that the Reds are exempt from tax on its purchase of bobbleheads and other promotional items. Not only will this decision benefit all Ohio professional sports teams, but will also apply to Ohio businesses that provides giveaways as an incentive for, and conditioned upon, the purchase of its products or services.

The issue was whether the promotional items were “resold,” i.e., conveyed to the attendees for consideration. The Reds CFO’s testified that the promotional items are advertised before the game and fans purchase tickets “with the expectation they will receive a promotional item.” Moreover, the Reds attempt to purchase enough items so that all attendees will get one and will try to remedy the situation for fans who do not receive the item. Therefore, the Reds received consideration since the promotional items were part of the bargain of the fans’ ticket purchase and attending the game.

“[F]ans did not receive the promotional items unexpectedly or by chance. Instead, the unique promotional items were an explicit part of the bargain, along with the right to attend the game, that the fans obtained in exchange for paying the ticket fee.” The Court distinguished these promotional items, which the Reds were obligated to provide, from other items fans have no expectation of receiving, such as t-shirts tossed into the stands or a foul ball. Accordingly, the Court overruled the BTA’s decision since it was not supported by any reliable and probative evidence.

The Tax Commissioner argued the Reds did not receive any consideration for the promotional items and that the items were given away gratuitously. In Ohio, sales / use tax does not apply to items that are purchased for resale. To constitute a “sale,” as defined by the Ohio Revised Code, the item must be transferred “for consideration.” Therefore, items distributed gratuitously, such as product samples or gifts to clients, are not resold and subject to tax since there is a lack of consideration. However, as explained above, the Ohio Supreme Court distinguished the Reds situation since a portion of the ticket price was consideration for the bobbleheads or other promotional items.

The Cincinnati Reds were represented in this case by Buckingham attorneys Steven A. Dimengo and Richard B. Fry III.

 

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