Attorneys for the Reds say they don’t have to pay tax on the purchase of these sorts of items because they essentially are already part of the cost of a fan’s ticket package.
Ohio law exempts companies from paying tax on items they buy to resell.
However, there’s disagreement on that. The Ohio tax commissioner has said the promotional items should be taxed because the Reds bought the items as giveaways and they aren’t selling them with tickets.
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As CourtNewsOhio.com reported, the Ohio Department of Taxation audited the Reds for purchases the club made from 2008 through 2010. The Ohio tax commissioner determined that the Reds owed about $88,000 in "use tax" for the promotional items they bought from vendors, even though the team intended to give away the items at the games. The department is seeking a penalty and interest for the non-payment of the tax.
In the Reds appealed the decision to the Ohio Board of Tax Appeals, arguing that the promotional items are advertised as “free” to potential ticket buyers, but that the actual cost of the items are factored into the ticket price, the CourtNews site said.
But the board ruled that because the price of a ticket for a game with a promotional item is the same as the price for a game without including the item, the Reds were not reselling the items.
The Reds appealed the board’s decision to the Supreme Court, which will hear oral argument in the case.
Other states have wrestled with this issue.
Forbes magazine says the Milwaukee Brewers argued a similar case before the Supreme Court of Wisconsin and lost So did the Minnesota Twins.
However, the Missouri Supreme Court ruled for the Kansas City Royals that “though the promotional items are ostensibly given away, the cost of purchasing those items is factored into the price charged for each ticket of admission to a Royals game,” Forbes said.