Tax Court Win Belongs To Reds As Bobbleheads & Other Promotional Items Ruled Exempt From Tax By Kelly Phillips Erb

The Cincinnati Reds may not have had a winning record in Major League Baseball this year, but they were big winners in court. The Ohio Supreme Court ruled 5-2 that the Cincinnati Reds aren’t required to pay taxes on promotional items that they give to fans who attend their games.

You may recall that the Reds challenged the Tax Commissioner of Ohio earlier this year on the question of whether promotional items that come with tickets are subject to use tax.

Like many sports teams (including my Phillies), the Reds use promotional items like bobbleheads, wall posters, and baseball cards, to woo fans to their games. The Reds don’t charge their fans separately for these promotional items: they come along with the ticket purchase. The Commissioner slapped the Reds with a tax bill on the sale of these items, claiming that they should be subject to use tax.

Under Ohio state law (and in most states), however, there is an exemption available to parties who resale an item to a consumer. The Reds argued that they were reselling the promotional items by including them in the ticket price – you can’t get a bobblehead or other item without buying a ticket. If the club is considered a reseller of the item, it is not a taxable user and doesn’t owe tax. The Commissioner disagreed and the matter went to court.