Sales Tax Slice: Ohio Department of Taxation Strikes Out in Bobblehead Case


The Cincinnati Reds obtained a favorable judgment from the Supreme Court of Ohio this week regarding payment of sales and use tax on promotional items. The case stemmed from an Ohio Department of Taxation assessment for use tax owed on the baseball team’s purchases of promotional items, like bobbleheads, that were distributed to ticketholders during certain games. The department argued that the Reds’ purchase of these items did not qualify for the resale exemption because they were “given away for free” rather than sold. However, the court overturned the assessment, reasoning that the giveaways constituted a sale, with the purchase price of the ticket serving as consideration. The court also pointed to testimony that fans could receive other promotional items if the team ran out of bobbleheads, even though the tickets do not guarantee a promotional item.

A similar judgement was reached back in 2000 in a case (subscription required) involving the Kansas City Royals. The Missouri team disputed a use tax assessment on promotional items, like t-shirts, hats, and trading cards that were distributed free of charge to fans who attended certain games. In its decision, the court determined that the cost of promotional items was factored in to the ticket price, which, in Missouri, is subject to sales tax. The court also noted that whether or not every attendee received a promotional item did not affect the taxability of these items.

In other states, like New York and Texas, promotional items given to customers or attendees free of charge are generally subject to sales tax when purchased by the promoter. Idaho, on the other hand, exempts promotional items offered in connection with a sale of tangible personal property, but not when offered with no purchase required.

Whether you head to games to enjoy America’s favorite pastime, or to add a Ken Griffey, Jr. bobblehead to your collection, it’s quite possible that state taxing authorities may be looking to get a cut of the revenue.

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: How does your state tax promotional items?

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