Cincinnati Reds Bobbleheads Up for Tax Debate
On February 21, 2018, the Ohio Supreme Court said it would hear arguments from the Cincinnati Reds and Tax Commissioner of Ohio, Joseph Testa, as to whether the team has been giving away, or selling for consideration, bobbleheads with ticket purchases. The outcome will determine whether the Reds will be responsible for back sales and use taxes for years 2008-10, which amount to $88,000.
Current tax law in Ohio allows items purchased for resale to be exempt from sales and use tax. The Reds had been providing ticket purchasers with bobbleheads, maintaining that the souvenirs are grouped in with the ticket cost and are therefore resold, not given away for free. It its motion filed December 21, 2017, the Reds alleged that the bobbleheads are “promotional items that are obligated to be transferred in exchange for the purchase of another item.” Further, the team contends that although the matter is of first impression to the court, Ohio precedent categorizing free utensils given with meals as resold, works in its favor.
The Ohio Department of Taxation meanwhile maintains that the souvenirs are “free promotional items,” and that because the team had not been charging for them, they could not have been resold, and are consequently subject to tax. (emphasis added).
Whatever the outcome, the Reds believe that the decision’s impact will be great. The team’s motion stated that “[dispensing free promotional items to bolster ticket sales] is a widespread practice across the country and not limited to professional sports teams.” A date for oral arguments has not yet been set.