Promotional items are a really big deal in baseball stadiums around the country and recently the Ohio Supreme Court ruled that promotional bobbleheads given to fans at Cincinnati Reds baseball games qualify for Ohio’s sale for resale exemption. The sale for resale exemption was met because the promotional items distributed at the games were transferred with the purpose to resell them for consideration. Therefore, the Cincinnati Reds were not liable for Ohio use tax on the purchases of promotional items distributed. The opinion reversed a decision from the Ohio Board of Tax Appeals, The Cincinnati Reds LLC v. Testa, Ohio Board of Tax Appeals, No. 2015-1707, May 22, 2017.
The cost of the promotional items is not separately stated from ticket prices and ticket prices do not vary in accordance with whether promotional items are offered at a particular game. However, the Reds did advertise to fans in advance when specific promotional items would be distributed. As the taxpayer, the Reds met their burden of proof by demonstrating that the promotional items are purchased for the purpose of reselling them, as the fans provided consideration (through money paid for tickets) in exchange for the Reds’ promise to hand out promotional items at the game.
The Court concluded that the transfer of promotional items to fans constitutes a “sale” pursuant to R.C. 5739.01(B)(1) and that the promotional items are subject to the sale for resale exemption of R.C. 5739.01(E). The promotional items were an explicit part of the bargain, along with the right to attend the game, obtained by fans in exchange for paying ticket fees. The Court emphasized that the opinion is only applicable to the specific facts identified in the case. (Cincinnati Reds LLC v. Testa, Ohio Supreme Court, No. 2018-Ohio-4669, November 21, 2018)