## Facts

- The Cincinnati Reds bought promotional merchandise (e.g., bobbleheads, jerseys) and distributed it to fans attending specified home games.
- The promotions were advertised in advance, limited to particular games, and created an expectation that attending fans would receive the item.
- When fans did not receive an advertised promotional item, the Reds provided replacement items or complimentary tickets.
- The Reds treated the cost of the promotional items as incorporated into the ticket price for those games, though not separately stated.
- Ohio conducted a use-tax audit and assessed use tax on the Reds’ purchases, treating the Reds as the ultimate consumers of the items.
- The Tax Commissioner denied reassessment, concluding the items were given away “for free” and not resold with admission.
- The Ohio Board of Tax Appeals affirmed, finding no intent to resell and no consideration paid for the items.

## Issues

1. Whether the Reds’ transfer of promotional items to fans at certain games constituted a “sale” for “consideration” under R.C. 5739.01(B)(1) even though the items were not separately priced.
2. Whether the Reds purchased the promotional items “for the purpose of resale” and therefore qualified for the sale-for-resale exemption under R.C. 5739.01(E), defeating the use-tax assessment.

## Decision

- The Supreme Court of Ohio reversed the Board of Tax Appeals and remanded.
- The Court held that fans provided consideration in exchange for the Reds’ promise to supply the advertised promotional items as part of the ticketed transaction.
- Because the transfers to fans constituted “sales,” the Reds purchased the promotional items for the purpose of resale.
- The Court concluded the sale-for-resale exemption applied, and the BTA erred in treating the items as merely “free giveaways” requiring separate, itemized consideration.

## Legal Principles

- A transfer of tangible personal property can be a “sale” when consideration is exchanged for the transfer, even if the consideration is bundled within a larger transaction and not separately stated. R.C. 5739.01(B)(1).
- For the sale-for-resale exemption, the relevant inquiry is whether the purchaser’s purpose is to resell the property in the ordinary course of business; resale may occur as part of a package transaction. R.C. 5739.01(E).
- The absence of a separate line-item price does not negate consideration when the buyer’s payment secures a contractual expectation to receive the item as part of the bargain.
- Treating promotional items as “free” is inconsistent with a transaction in which the seller markets the items to induce purchases and undertakes to provide them to paying customers.

## Conclusion

The Ohio Supreme Court held that the Reds’ advertised game-day promotional items were transferred to fans as part of a bargained-for, ticketed exchange supported by consideration, making the transfers “sales” and the Reds’ purchases exempt as sales-for-resale; the use-tax assessment was therefore reversed and the matter remanded.


Cincinnati Reds, L.L.C. v. Testa, 155 Ohio St. 3d 512, 122 N.E.3d 1178 (Ohio 2018)