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Cincinnati Reds v. Testa

122 N.E.3d 1178, 155 Ohio St. 3d 512, (2018)

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Cincinnati Reds v. Testa

Ohio Supreme Court

122 N.E.3d 1178, 155 Ohio St. 3d 512, (2018)

Facts

The Cincinnati Reds (the Reds) (plaintiff) was a baseball team based in Cincinnati, Ohio. To increase ticket sales, the Reds distributed promotional merchandise at some of their baseball games. The promotional merchandise was only available at those games. The Reds specifically advertised the promotional merchandise, and their fans expected to receive promotional material. The Reds gave replacement items or complimentary tickets to fans who did not receive the advertised promotional merchandise. The cost of the promotional merchandise was factored into the ticket price for the baseball game and was not separately stated in the price of the ticket. The purchase of tickets was not subject to sales tax. The Ohio tax commissioner, Joseph Testa (defendant), conducted a use-tax audit of the Reds’ purchases and found that the Reds owed taxes on their initial purchase of the promotional merchandise from suppliers. The Reds appealed, arguing that the promotional merchandise should be excluded from Ohio’s sales taxes under the sale-for-resale exemption. Under Ohio’s retail-sales-tax laws, all sales of tangible personal property were subject to taxation except sales in which the purpose of the consumer was to resell the property. The tax laws explained that the sale-for-resale exemption only applied to transactions in which the consumer received consideration for reselling the property. The Ohio Board of Tax Appeals upheld the commissioner’s determination, holding that the Reds did not intend to resell the promotional merchandise because the Reds gave the merchandise away for free, meaning that the Reds received no consideration for the promotional merchandise. The Reds appealed, arguing that they intended to resell the merchandise because they promised to distribute the merchandise to fans, creating a contractual expectation and receiving consideration through the fans’ purchase of tickets.

Rule of Law

Issue

Holding and Reasoning (Fischer, J.)

Dissent (DeGenaro, J.)

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