[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Cincinnati Reds, L.L.C. v. Testa, Slip Opinion No. 2018-Ohio-4669.]




                                        NOTICE
     This slip opinion is subject to formal revision before it is published in an
     advance sheet of the Ohio Official Reports. Readers are requested to
     promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
     South Front Street, Columbus, Ohio 43215, of any typographical or other
     formal errors in the opinion, in order that corrections may be made before
     the opinion is published.


                         SLIP OPINION NO. 2018-OHIO-4669
  CINCINNATI REDS, L.L.C., APPELLANT, v. TESTA, TAX COMMR., APPELLEE.
  [Until this opinion appears in the Ohio Official Reports advance sheets, it
       may be cited as Cincinnati Reds, L.L.C. v. Testa, Slip Opinion No.
                                   2018-Ohio-4669.]
Taxation—Use tax—Sale-for-resale exemption, R.C. 5739.01(E)—Promotional
        items distributed at professional baseball games were transferred with the
        purpose to “resell” them for consideration and therefore qualified for tax
        exemption—Decision of Board of Tax Appeals reversed and cause
        remanded.
   (No. 2017-0854—Submitted June 13, 2018—Decided November 21, 2018.)
              APPEAL from the Board of Tax Appeals, No. 2015-1707.
                                 __________________
        FISCHER, J.
        {¶ 1} It would be an understatement to say that baseball has changed in
dramatic ways since, as Justice Harry Blackmun wrote, the “Cincinnati Red
Stockings came into existence in 1869 upon an outpouring of local pride,” Flood v.
                               SUPREME COURT OF OHIO




Kuhn, 407 U.S. 258, 261, 92 S.Ct. 2099, 32 L.Ed.2d 728 (1972). From the 1890s,
when National Baseball Hall of Fame legend and Newcomerstown, Ohio’s own Cy
Young starred for the Cleveland Spiders; through the 1920s, when Judge Kenesaw
Mountain Landis, a native of Milville, Ohio, and a Hall of Famer, strove as Major
League Baseball’s first commissioner to maintain the integrity of the game
following the notorious Black Sox scandal; through the 1940s, when player-
manager and Hall of Famer Lou Boudreau guided the Cleveland Indians to a World
Series championship and was the American League’s Most Valuable Player
(“MVP”) in 1948; through the 1950s and 1960s, when Hall of Fame manager
Walter Alston of Venice, Ohio, and Miami University won four World Series titles
with the Brooklyn and Los Angeles Dodgers; through the Big Red Machine era of
the 1970s; through the 1980s, when Dayton, Ohio, native, Ohio University
alumnus, and Hall of Famer Mike Schmidt won three National League MVP
Awards and was named World Series MVP in 1980 for the Philadelphia Phillies;
and into the 1990s, when Cincinnati’s homegrown Hall of Famer Barry Larkin led
the Reds to a World Series Championship, professional baseball has seen the
creation of the American League in 1900, the creation of the World Series in 1903,
the first radio broadcast of a game in 1921, the first night game at Crosley Field in
Cincinnati in 1935, the breaking of the color barrier by Jackie Robinson (in the
National League) and Larry Doby (for the Indians in the American League), the
first televised World Series in 1947, the establishment of the designated hitter in
1973, and the cancellation of the World Series due to a player strike in 1994. See
Cy          Young,        available     at       https://www.baseball-reference.com
/players/y/youngcy01.shtml (accessed Oct. 25, 2018); Kenesaw Mountain Landis,
available            at       http://mlb.mlb.com/mlb/history/mlb_history_people.jsp
?story=com_bio_1 (accessed Oct. 25, 2018); Lou Boudreau, available at
https://baseballhall.org/hall-of-famers/boudreau-lou (accessed Oct. 25, 2018);
Walter        Alston,      available     at      https://www.baseball-reference.com




                                             2
                                January Term, 2018




/managers/alstowa01.shtml (accessed Oct. 25, 2018); Mike Schmidt, available at
https://baseballhall.org/hall-of-famers/schmidt-mike (accessed Oct. 25, 2018);
Barry Larkin, available at https://baseballhall.org/hall-of-famers/larkin-barry
(accessed     Oct.   25,   2018);   Timeline,   available   at   https://www.pbs.org
/kenburns/baseball/timeline/ (accessed Oct. 25, 2018); see also Flood at 260-264.
       {¶ 2} At one time, the emphasis in professional baseball was on the game,
as succinctly put in the title of the documentary series covering pre-1960s Major
League Baseball that was created by a national cable network, HBO: “When It Was
a Game.” See Richard Sandomir, Old Color Clips Reborn in HBO Documentary,
New      York        Times     (June     21,     1991)      B12,     available     at
https://www.nytimes.com/1991/06/21/sports/tv-sports-baseball-old-color-clips-
reborn-in-hbo-documentary.html (accessed Oct. 25, 2018). In the early days,
professional baseball was a business, but the game itself was the focus of that
business, as explained by Justice Oliver Wendell Holmes Jr. in 1922: “The business
is giving exhibitions of base ball.” Fed. Baseball Club of Baltimore, Inc. v. Natl.
League of Professional Baseball Clubs, 259 U.S. 200, 208, 42 S.Ct. 465, 66 L.Ed.
989 (1922).
       {¶ 3} In Fed. Baseball, the court held that the business of professional
baseball did not constitute interstate commerce and was not subject to antitrust law.
Id. at 207-209. The court reaffirmed the holding of Fed. Baseball when it upheld
Major League Baseball’s reserve clause (which permitted a team to retain the rights
to a player even after the player’s contract had expired) in Flood. Flood at 284.
Despite noting that the antitrust exemption for Major League Baseball was “an
exception and an anomaly,” id. at 282, the court concluded that any change to the
exemption would need to be made by Congress, id. at 285. Following Flood,
however, player free agency was established in Major League Baseball through
arbitration and collective bargaining, and players’ salaries increased significantly
as league revenues grew. Noah Goodman, The Evolution and Decline of Free




                                          3
                             SUPREME COURT OF OHIO




Agency in Major League Baseball: How the 2012-2016 Collective Bargaining
Agreement Is Restraining Trade, 23 Sports Lawyers J. 19, 20-21, 37-39 (2016).
       {¶ 4} Along with increasing revenues and salaries, other factors have
contributed to the transformation of professional baseball into something more than
just a game. Faced with rising ticket prices and increasing entertainment options,
Major League Baseball has experienced challenges in getting fans to attend games.
See Mark Koba, Keeping Fans in the Stands Is Getting Harder to Do,
https://www.cnbc.com/id/100886843 (accessed Oct. 25, 2018).                 Baseball
organizations have thus become increasingly creative in finding ways to entice fans
to attend games, turning stadiums into “mini theme parks” featuring additional
attractions such as fireworks, concerts, and expanded dining options. Id. One such
enticement is the opportunity to receive unique merchandise—such as bobbleheads,
shirts, blankets, caps, player cards, tote bags, magnetic schedules, photographs, and
bats—that can be obtained only by attending a game. This merchandise, commonly
known as “promotional items,” is the subject of this appeal.
       {¶ 5} In this case, we are asked to consider how state tax law applies to the
purchase of those promotional items by appellant, Cincinnati Reds, L.L.C. (“the
Reds”). More specifically, the question before us is whether the sale-for-resale
exemption of R.C. 5739.01(E) precludes the Reds from having to pay use tax on
those promotional items. For the reasons explained below, we conclude that the
exemption applies in this case. Thus, in the familiar words of Marty Brennaman,
longtime Reds radio announcer and recipient of the National Baseball Hall of
Fame’s Ford C. Frick Award, we determine that “this one belongs to the Reds.”
We accordingly reverse the decision of the Board of Tax Appeals (“BTA”).
                         I. FACTUAL BACKGROUND
       {¶ 6} Appellee, the tax commissioner, conducted a use-tax audit of the
Reds’ purchases over the period January 1, 2008, through December 31, 2010. The




                                         4
                                January Term, 2018




portion of the audit at issue in this appeal concerns the Reds’ purchase of
promotional items.
       {¶ 7} At the BTA hearing, the Reds’ chief financial officer, Doug Healy,
testified that the purpose of distributing promotional items is to drive ticket revenue
at games that would otherwise be attended by fewer fans. He testified that the
increased ticket revenue more than offsets the cost of promotional items
distributed—“[o]therwise we wouldn’t do it.” Healy said that the Reds decide prior
to the season which games might otherwise have low attendance and therefore
could most benefit from the team’s distribution of promotional items.
       {¶ 8} Healy testified that the Reds advertise in advance that specific
promotional items will be distributed at particular games, using media such as
radio, television, billboards, and fliers. Items sold in the Reds’ “fan shop” are
similar to, but not the same as, the promotional items distributed to ticketholders at
games, which are otherwise unavailable to the general public.
       {¶ 9} The cost of promotional items is not separately stated from ticket
prices, nor do ticket prices vary in accordance with whether promotional items are
offered at a particular game. But ticket prices overall are set to cover the cost of
promotional items along with other overhead associated with holding them as
inventory and distributing them. Thus, the price of tickets to a particular game does
not specifically reflect the items distributed at that game; the Reds try to, according
to Healy, “smooth [the] ticket prices throughout the year.”
       {¶ 10} The tickets themselves do not state or include any guarantee
regarding promotional items. However, Healy testified that fans who purchase
tickets to games at which promotional items are offered “[a]bsolutely” believe that
they are purchasing both the promotional item and the right to view the game at the
ballpark. He said that fans expect and feel entitled to receive the promotional items,
and he explained that it would be a “public relations nightmare” if the Reds reneged
on the commitment to distribute them. The uncontradicted record indicates that the




                                          5
                             SUPREME COURT OF OHIO




Reds do not purposely underorder promotional items but instead estimate the
amount of promotional items needed for a particular game based upon the projected
attendance for that game.      In the event that the Reds run out of any given
promotional item, Healy testified that the Reds “will remedy it.” He acknowledged
that in these instances, the Reds may not be able to provide exactly the same
promotional item, but he said that the Reds would “make it right” in ways such as
giving another promotional item or complimentary tickets to fans who had failed
to receive the designated items.
       {¶ 11} The tax commissioner in his final determination concluded that
“there is no evidence that the promotional items were resold with the admission to
the games.” The tax commissioner accordingly denied the Reds’ request to remove
the promotional items from the use-tax assessment.
       {¶ 12} In affirming the decision of the tax commissioner, the BTA similarly
found that “the promotional items * * * were given away for free, primarily to
increase interest in certain targeted games or generally increase interest among a
broader audience.” BTA No. 2015-1707, 2017 WL 2324085, *2 (May 22, 2017).
The BTA, despite the uncontradicted record evidence to the contrary, also stated
that “the cost of the subject promotional items is not included in the ticket price,”
in the sense that “the ticket price for each particular seat is the same throughout an
entire season regardless of whether a promotional item is being offered.” Id. The
BTA further stated that


       at the time they purchased their tickets, the Reds’ patrons were not
       charged a separate, distinct amount for the promotional items given
       away. Moreover, a patron became eligible to receive a promotional
       item only after that game’s ticket was purchased. Patrons paid the
       same amount for game tickets on promotional item giveaway days,
       even if they did not actually receive a promotional item, i.e., they




                                          6
                                January Term, 2018




        chose not to take the item upon entrance to the game, or they failed
        to receive an item because the supply ran out. Finally, the Reds’
        advertising confirmed that patrons were not being charged a
        separate amount for the items, clearly providing that the promotional
        items were “free,” or a “giveaway.”


Id. at *3.
        {¶ 13} In their appeal, the Reds set forth two propositions of law:


               1. When there is a transfer of valuable property to induce
        the purchase of another item, the consideration paid is for both the
        property and the other item. A separately stated price for the
        property is unnecessary to establish it was transferred for
        consideration.
               2. The Board of Tax Appeals’ decision is unreasonable and
        unlawful because material findings made by the Board are not
        supported by any reliable and probative evidence.


                                  II. ANALYSIS
        {¶ 14} Pursuant to R.C. 5741.02(C)(2) as relevant here, use tax does not
apply to “tangible personal property or services, the acquisition of which, if made
in Ohio, would be a sale not subject to the tax imposed by sections 5739.01 to
5739.31 of the Revised Code.” It follows that if the promotional items are not
subject to sales tax pursuant to R.C. 5739.01 through 5739.31, then the Reds do not
owe use tax for those items. Thus, the controlling statutory provisions in this case
are under R.C. Chapter 5739, the sales-tax chapter of the Revised Code. See
Procter & Gamble Co. v. Lindley, 17 Ohio St.3d 71, 73, 477 N.E.2d 1109 (1985)
(observing that the court need only focus on the relevant sales-tax provisions




                                          7
                              SUPREME COURT OF OHIO




because use tax will not apply when the acquisition of property would be exempt
from sales tax).
        {¶ 15} One main feature of the sales and use taxes is the legislative intent
to limit imposition of the tax to retail transactions, while excluding or exempting
from the tax earlier transactions that are not retail transactions but rather are at the
production or wholesale levels. Therefore, the starting point in cases like this often
is the statutory definition of “retail sale.” R.C. 5739.01(E) defines “retail sale” as
“all sales, except those in which the purpose of the consumer is to resell the thing
transferred or benefit of the service provided, by a person engaging in business, in
the form in which the same is, or is to be, received by the person.” (Emphasis
added.) It is undisputed that the Reds purchased the promotional items from their
suppliers and thereby became a “consumer” under the sales-tax and use-tax laws.
See R.C. 5739.01(D)(1); R.C. 5741.01(F) (a “consumer” is “any person who has
purchased tangible personal property”); see also R.C. 5739.03(A); R.C. 5741.02(B)
(“Each consumer * * * shall be liable for the tax”). Thus, the question in this case
is whether the Reds purchased the promotional items for the purpose of reselling
them.
        {¶ 16} The Reds, as purchaser of the promotional items, can have the
purpose to “resell” under R.C. 5739.01(E) only if the club intends to make “sales”
of the items. “Sale” is defined in R.C. 5739.01(B)(1) to include “[a]ll transactions
by which title or possession, or both, of tangible personal property, is or is to be
transferred, or a license to use or consume tangible personal property is or is to be
granted,” but this definition applies only if those “transactions [are] for a
consideration,” R.C. 5739.01(B).        R.C. 5739.02(C) establishes the sales-tax
presumption that “all sales made in this state are subject to the tax until the contrary
is established,” and R.C. 5741.02(G) carries that presumption over to the use tax.
The Reds accordingly had the burden to prove that they purchased promotional
items for the purpose of reselling them to fans.




                                           8
                                 January Term, 2018




         {¶ 17} Consideration, in the contract-law sense, is important here: the
question whether the Reds purchased promotional items for resale entails asking
whether fans furnished consideration for the Reds’ promise to hand out the
promotional items at the games.
 A. The Only Evidence in the Record Shows the Existence of Consideration
         {¶ 18} The BTA decided this case based on its finding that given all the
circumstances, the Reds intended to give away promotional items for free rather
than to sell them. The Reds contest this finding, arguing that they resell the
promotional items by promising to distribute them. The Reds argue that this
promise creates a contractual expectation on the part of the fans, who purchase
tickets and attend the games as consideration for receiving the unique promotional
items.
         {¶ 19} This court has treated the question whether there is a “purpose * * *
to resell” under R.C. 5739.01(E) as an issue of intent to be determined in light of
attendant facts and circumstances, with the taxpayer who claims sale-for-resale
exclusion bearing the burden to prove its actual intent to resell. Satullo v. Wilkins,
111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 25-31. Based on the
record before us, we agree with the Reds’ second proposition of law and determine
that the BTA’s finding that the Reds intended to give away promotional items rather
than to sell them is not supported by any reliable and probative evidence found in
the record—in fact, the evidence in the record is to the contrary—and is therefore
unreasonable and unlawful.
         {¶ 20} “[W]hether there is consideration at all is a proper question for a
court.” Williams v. Ormsby, 131 Ohio St.3d 427, 2012-Ohio-690, 966 N.E.2d 255,
¶ 17. Although courts generally do not inquire into the adequacy of consideration
if consideration is found to exist, courts must determine “ ‘whether any
“consideration” was really bargained for.’ ”       Id., quoting Carlisle v. T & R
Excavating, Inc., 123 Ohio App.3d 277, 283-284, 704 N.E.2d 39 (9th Dist.1997).




                                          9
                             SUPREME COURT OF OHIO




       {¶ 21} Healy’s unrefuted testimony indicates that in the specific
circumstances here, fans gave consideration in exchange for promotional items. He
explained that the Reds advertise in advance to notify fans when specific
promotional items will be distributed. Fans then purchase tickets to those specific
games with the expectation that they will receive a promotional item. The Reds
attempt to purchase enough promotional items so that one will be available for each
fan. Healy offered undisputed testimony that in the event that the Reds do not have
enough promotional items to provide one to each fan, the Reds would provide
something of equivalent value, such as a different promotional item or a ticket to a
future game.
       {¶ 22} In determining that no consideration was given by fans in exchange
for the promotional items, the tax commissioner and BTA focused on their findings
that fans pay the same price to attend a game regardless of whether a promotional
item is offered and that the cost of the promotional item is not included in the ticket
price. But Healy specifically testified that the costs of promotional items are
included in ticket prices when they are set before the start of a season and that
promotional items are distributed at less desirable games for which tickets are not
expected to be sold out. Thus, rather than offering discounted ticket prices to these
less desirable games, it stands to reason that by including the cost of the
promotional item in the ticket price, one portion of the ticket price accounts for the
right to attend the less desirable game and a separate portion of the ticket price
accounts for the right to receive the promotional item. Based on this record, we
accordingly conclude that the promotional items constituted things of value in
exchange for which fans paid money that was included in the ticket prices.
       {¶ 23} Notably, the promotional items at issue in this case are distinct from
unexpected, gratuitous items that fans might receive when attending a game. For
instance, a fan might catch and bring home a foul ball hit by a player or a t-shirt
tossed into the stands. In these instances, the fan had no expectation of receiving




                                          10
                                January Term, 2018




the item and did not purchase a ticket under the assumption that the item would be
provided by the team.
       {¶ 24} In the present case, fans did not receive the promotional items
unexpectedly or by chance. Instead, the unique promotional items were an explicit
part of the bargain, along with the right to attend the game, that the fans obtained
in exchange for paying the ticket fee. We therefore conclude that the fans furnished
consideration for the Reds’ promise to hand out these types of promotional items
at the games and that the Reds met their burden to prove that they purchased
promotional items for the purpose of reselling them to fans.
       {¶ 25} While our conclusion may be viewed as exposing a “loophole” by
which sports organizations can avoid paying use tax on promotional items, we
emphasize that our interpretation is compelled by the application of R.C. Chapter
5739 to the specific facts in the record in this case. If the General Assembly prefers
that sports organizations pay use tax on promotional items under the circumstances
presented here, it can amend the Revised Code to require them to do so.
 B. Application of the Sale-for-Resale Exemption in this Case Is Consistent
                           with Hyatt Corp. v. Limbach
       {¶ 26} In arguing that the promotional items were not resold pursuant to
R.C. 5739.01(E) because the Reds did not make a taxable “sale” of the promotional
items, the tax commissioner relies on Hyatt Corp. v. Limbach, 69 Ohio St.3d 537,
634 N.E.2d 995 (1994). Given the factual differences between this case and Hyatt
Corp., we conclude that Hyatt Corp. does not support the tax commissioner’s
argument and instead accords with our conclusion that the promotional items are
subject to the sale-for-resale exemption of R.C. 5739.01(E).
       {¶ 27} In Hyatt Corp., a hotel operator that paid cleaning companies to
launder the linens it supplied to its guests argued that the linen-cleaning service was
resold to its guests and therefore did not qualify as a “retail sale” pursuant to R.C.
5739.01(E). Id. at 539. This court concluded that although the sale-for-resale




                                          11
                             SUPREME COURT OF OHIO




exemption applied in situations involving transient guests, the exemption did not
apply in situations involving long-term guests. Id. at 540.
       {¶ 28} At the time of the court’s decision in Hyatt Corp., a transaction by
which industrial laundry-cleaning service was provided constituted a “sale”
pursuant to former R.C. 5739.01(B)(3)(d), Am.Sub.H.B. No. 152, 145 Ohio Laws,
Part II, 3341, Part III, 4287. The court did not rely on that statute, however, and its
decision was instead premised on R.C. 5739.01(B)(2), which specifies that the
definition of “sale” includes “[a]ll transactions by which lodging by a hotel is or is
to be furnished to transient guests.”
       {¶ 29} The court explained that “[i]n a lodging transaction, the hotel
transfers a full sleeping room to its guest. This transfer includes the use of linens
to sleep on and to wash with.” Hyatt Corp., 69 Ohio St.3d at 540, 634 N.E.2d 995.
Because hotel guests bargained solely for lodging, rather than lodging plus a
specific linen-cleaning service, the court focused on R.C. 5739.01(B)(2), which
addresses lodging transactions, rather than former R.C. 5739.01(B)(3)(d), which
addressed industrial laundry-cleaning-service transactions.
       {¶ 30} Because linen-cleaning service is a transaction by which lodging by
a hotel is furnished to a guest pursuant to R.C. 5739.01(B)(2), it follows that this
service is part of a sale in situations involving transient guests. The furnishing of
lodging to long-term guests, however, falls outside of the scope of R.C.
5739.01(B)(2) by virtue of R.C. 5739.01(N), which defines “transient guests” as
“persons occupying a room or rooms for sleeping accommodations for less than
thirty consecutive days.” This means that because furnishing lodging to long-term
guests is not a part of a “sale” under R.C. 5739.01(B)(2)—and is thus not something
that can be resold—the sale-for-resale exemption could not apply to linen-cleaning
service provided to long-term guests. As this court explained in Hyatt Corp.,
“Under the statutes, renting these rooms is not a sale because lodging is not sold to




                                          12
                                January Term, 2018




a transient guest, and consequently, the cleaning service is not resold. Accordingly,
this linen cleaning transaction is not excepted.” Hyatt Corp. at 540.
       {¶ 31} As the tax commissioner points out, like the furnishing of lodging to
long-term guests, the sale of game tickets falls outside the definition of “sale” under
R.C. 5739.01(B). This does not mean that Hyatt Corp. controls in this case,
however. In Hyatt Corp., the court treated former R.C. 5739.01(B)(3)(d) as
inapplicable, and whether the linen-cleaning service was taxable depended on
whether the service was a transaction by which lodging by a hotel was furnished to
transient guests pursuant to R.C. 5739.01(B)(2). If the service was a feature of
lodging provided to a transient guest, it was part of a “sale.” If the service was a
feature of lodging provided to a long-term guest, however, it was not part of a
“sale.” Thus, in Hyatt Corp., whether the linen-cleaning service was taxable
depended on the nature of the lodging.
       {¶ 32} In this case, however, whether the promotional items are taxable
does not depend on whether selling tickets constitutes a “sale.” This is so because
transactions involving promotional items are “sales” in and of themselves pursuant
to R.C. 5739.01(B)(1), which provides that “[a]ll transactions by which title or
possession, or both, of tangible personal property, is or is to be transferred” are
“sales.” As we have noted above, the promotional items were an explicit part of
the bargain, along with the right to attend the game, that the fans obtained in
exchange for paying the ticket fee. This is in distinct contrast to Hyatt Corp., in
which this court found that the linen-cleaning service was not a separate and explicit
part of the bargain by which lodging was provided. If it had found otherwise, the
court would have applied former R.C. 5739.01(B)(3)(d) and treated the linen-
cleaning service as a separate transaction that constituted a “sale” pursuant to that
statutory provision. We accordingly conclude that Hyatt Corp. does not support
the tax commissioner’s argument.




                                          13
                               SUPREME COURT OF OHIO




        C. R.C. 5739.02(B)(35)(a) Is Not Affected by Our Conclusion
       {¶ 33} The tax commissioner also argues that treating the promotional items
in this case as purchases for resale effectively nullifies R.C. 5739.02(B)(35)(a),
which exempts from sales tax those items that are purchased with the intention of
using them to facilitate retail sales. R.C. 5739.02(B)(35)(a) states that the sales
covered by its terms “consist[] of newspaper inserts, catalogues, coupons, flyers,
gift certificates, or other advertising material that prices and describes tangible
personal property offered for retail sale.” The tax commissioner argues that
because that list does not include items like the promotional items at issue in this
case, the General Assembly must have intended that the promotional items in this
case be subject to taxation.
       {¶ 34} However, the mere fact that an exemption exists for one category of
promotional items does not mean that all other promotional items are subject to
taxation. We have explained that the promotional items here are not subject to sales
tax under R.C. 5739.01(E) because they were bought by the Reds for the purpose
of reselling them. Because the Reds’ purchase of the promotional items did not
constitute a “retail sale” under R.C. 5739.01(E), the provisions of R.C. 5739.02—
which apply only to retail sales—are irrelevant in this case. We accordingly reject
the tax commissioner’s argument that our conclusion in this case effectively
nullifies R.C. 5739.02(B)(35)(a).
                                III. CONCLUSION
       {¶ 35} Echoing a phrase often used by the person who was the youngest-
ever Major League Baseball player, a longtime Reds player and radio commentator,
and a native of Hamilton, Ohio, Joe Nuxhall, having completed our analysis, we
are now “rounding third and heading for home.”
       {¶ 36} Because the specific evidence in the record establishes that fans who
purchase tickets to Reds games at which unique promotional items will be
distributed do so with the expectation that they will receive those promotional




                                        14
                                January Term, 2018




items, we conclude that consideration is given in exchange for the Reds’ agreement
to supply fans with those promotional items. The transfer of promotional items to
fans thus constitutes a “sale” pursuant to R.C. 5739.01(B)(1), and the promotional
items are subject to the sale-for-resale exemption of R.C. 5739.01(E).            We
accordingly conclude that the Reds are not liable for use tax on the promotional
items pursuant to R.C. 5741.02.
        {¶ 37} We note that this opinion focuses on the sole issue in the case as
identified by the Reds: whether the Reds received consideration from fans in
exchange for the promotional items so that those items qualified for the sale-for-
resale exemption of R.C. 5739.01(E). We do not reach any conclusions on issues
not before us in this appeal, and we reverse the BTA’s decision.
                                                                  Decision reversed.
        FRENCH, J., concurs.
        O’CONNOR, C.J., and O’DONNELL and KENNEDY, JJ., concur in judgment
only.
        DEGENARO, J., dissents, with an opinion joined by MAYLE, J.
        CHRISTINE E. MAYLE, J., of the Sixth District Court of Appeals, sitting for
DEWINE, J.
                               _________________
        DEGENARO, J., dissenting.
        {¶ 38} I respectfully dissent from the judgment of a majority of this court
to reverse the decision of the Board of Tax Appeals (“BTA”). The lead opinion
reasons that because the promotional items purchased and distributed by appellant,
Cincinnati Reds, L.L.C. (“the Reds”), were a separate and “explicit part of the
bargain” when baseball fans purchased certain game tickets, the Reds acquired
those items for the purpose of “reselling” them to the ticket purchasers and,
consequently, that the Reds are not obligated to pay use tax on those items. Lead
opinion at ¶ 24; see also id. at ¶ 32. I disagree. Because the ticket sales themselves




                                         15
                               SUPREME COURT OF OHIO




are not taxed, the effect of reversing the decision of the BTA is to relieve the Reds’
acquisition and transfer of the promotional items—which are tangible personal
property—of any sales- or use-tax obligation, despite the fact that the sales tax and
the use tax generally apply to such transactions. See R.C. 5739.01(B)(1) (for
purposes of the sales tax, “sale” generally includes all transactions transferring title
or possession of tangible personal property for consideration); R.C. 5741.02(B)
(each consumer who uses tangible personal property in the state generally must pay
use tax). In my view, the evidence presented in this case and the applicable law
dictate the opposite result.
                                 Legal Framework
        {¶ 39} A consumer who has purchased tangible, personal property for
storage, use, or other consumption in Ohio generally must pay use tax. See R.C.
5741.02(A)(1); R.C. 5741.02(B). Subject to an exception that is not relevant here,
the use tax does not apply to the use of “tangible personal property or services, the
acquisition of which, if made in Ohio, would be a sale not subject to the tax imposed
by sections 5739.01 to 5739.31 of the Revised Code.” R.C. 5741.02(C)(2). In other
words, items that are exempt from sales tax are also generally exempt from use tax.
Accordingly, although this case involves a use-tax assessment, we focus on the
provisions of R.C. Chapter 5739, the sales-tax chapter of the Revised Code. See
Procter & Gamble Co. v. Lindley, 17 Ohio St.3d 71, 73, 477 N.E.2d 1109 (1985).
        {¶ 40} Relevant here, pursuant to R.C. 5739.01(E), the definition of “retail
sale” does not include those sales “in which the purpose of the consumer is to resell
the thing transferred or benefit of the service provided.” And in order for a
transaction to constitute a “sale,” it must be “for a consideration.” R.C. 5739.01(B).
       {¶ 41} The main issue in this case is whether the sale-for-resale exception
of R.C. 5739.01(E) relieves the Reds from having to pay use tax on promotional
items, such as bobbleheads, that they distribute at games.




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                                 January Term, 2018




          The BTA’s Factual Findings Should Be Afforded Deference
        {¶ 42} My principal point of disagreement lies with the lead opinion’s
determination that the BTA’s finding that the Reds intended to give away
promotional items rather than to sell them “is not supported by any reliable and
probative evidence found in the record” (emphasis added) and that the BTA’s
decision is therefore “unreasonable and unlawful.” Lead opinion at ¶ 19. In the
same vein, I disagree with the lead opinion’s conclusion that the evidence
unequivocally establishes that fans gave consideration in exchange for the
promotional items.
        {¶ 43} In the BTA proceedings, the Reds bore the burden to demonstrate
that they intended to resell the promotional items. Satullo v. Wilkins, 111 Ohio
St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 27; R.C. 5739.02(C) (all sales are
presumed taxable “until the contrary is established”); R.C. 5741.02(G) (the same
presumption applies regarding use tax). The BTA concluded that the Reds failed
to meet this burden. We must affirm the BTA’s factual findings “ ‘if they are
supported by reliable and probative evidence, and we afford deference to the BTA’s
determination of the credibility of witnesses and its weighing of the evidence
subject only to an abuse-of-discretion review on appeal.’ ” Accel, Inc. v. Testa, 152
Ohio St.3d 262, 2017-Ohio-8798, 95 N.E.3d 345, ¶ 16, quoting HealthSouth Corp.
v. Testa, 132 Ohio St.3d 55, 2012-Ohio-1871, 969 N.E.2d 232, ¶ 10.
        {¶ 44} Here, the evidence demonstrates that the Reds’ pregame advertising
often stated that such items were available as a “giveaway,” that they would be
distributed for “free,” and that quantities were limited (e.g., “Free to the first 20,000
fans in attendance”). The game tickets contained no written guarantees that fans
who bought tickets would receive the promotional items. The Reds’ chief financial
officer (“CFO”) testified at the BTA hearing that the Reds provided season-ticket
holders greater “access to promotional items” by allowing them to enter the stadium
30 minutes earlier than single-game ticket holders. Evidence in the record shows




                                           17
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that on most promotional-item-giveaway days, thousands of fans―sometimes
more than 10,000―did not receive the promotional item. According to the Reds’
CFO, if a fan who did not receive an item complained, the Reds would “make
accommodations” to remedy the situation. Typically, the Reds would provide a
substitute promotional item to an aggrieved fan, but if a person complained enough,
the Reds would refund the full ticket price.
       {¶ 45} Moreover, although the Reds’ CFO testified at the BTA hearing that
“there’s a real cost” associated with the promotional items that is “part of the
admission,” he also emphasized that advertising the promotional giveaways
provided “an incremental ticket lift” that was important because the Reds “are in
the business of selling tickets” (emphasis added)—in other words, the Reds were
not in the business of reselling those promotional items but instead distributed them
to promote ticket sales. And although—like any other overhead expense—the cost
of promotional items was apparently built into ticket prices overall, the record
clearly supports the BTA’s finding that “the ticket price for each particular seat is
the same * * *, regardless of whether a promotional item is being offered,” BTA
No. 2015-1707, 2017 WL 2324085, *2 (May 22, 2017). The Reds’ CFO stated that
the ticket prices for a particular game were not dependent on the Reds’ providing
promotional items at that game.
       {¶ 46} Thus, the BTA was justified in concluding that the purchase of a
game ticket constituted consideration for nothing more than the right to attend the
baseball game and that the Reds were not reselling the promotional items by
advertising and giving them away free of any charge beyond the price of the
ticket—as the Reds’ CFO testified, the Reds were “driv[ing] additional ticket
attendance” by distributing the promotional items. Incentivizing paid attendance
at the games does not—at least not necessarily, as the lead opinion contends—
involve “reselling” the promotional items.




                                         18
                                 January Term, 2018




          {¶ 47} I disagree with the lead opinion’s conclusion that the ticket
purchasers provided consideration for the promotional items. The lead opinion
notes that the cost of promotional items was built into all ticket prices before the
season, with no separate charge for the promotional item offered at a particular
game, and it concludes that “by including the cost of the promotional item in the
ticket price, one portion of the ticket price accounts for the right to attend the less
desirable game and a separate portion of the ticket price accounts for the right to
receive the promotional item.” Lead opinion at ¶ 22. But that means that every
ticket purchaser at every game helped pay for promotional items regardless of
whether a promotional item was received―or was even offered―at a particular
game, and that circumstance breaks the link between the payment of the ticket price
and the offer of a promotional item.
          {¶ 48} The facts that the Reds’ CFO testified that the fans have “a certain
level of expectation that they will receive the bobblehead” and that he answered
“yes” to the Reds’ counsel’s assertion that the fans “feel entitled to the promotional
items” are not dispositive of this consideration either. Insofar as the CFO was
providing his opinion—unrefuted or not—about the subjective beliefs of third
parties, the BTA could have reasonably discounted that testimony. Regardless, the
CFO also later described the fans’ “expectation” as simply being that the Reds
would, in fact, distribute the number of promotional items advertised. That is, the
CFO explained that “there is an expectation when we put it out to the marketplace
that if we say we’re going to have * * *, let’s say 30,000 bobbleheads, that the Reds
are going to have 30,000 bobbleheads” and that “there is an expectation, especially
if they arrive early, that they’re going to get a promotional item.” (Emphasis
added.)
          {¶ 49} Under these circumstances, the BTA could lawfully conclude that
the offer of the promotional items did not constitute a contractual obligation
supported by the purchase of the tickets. Rather, the situation here was in the nature




                                          19
                             SUPREME COURT OF OHIO




of what courts have referred to as a “conditional gratuitous promise,” Williams v.
Ormsby, 131 Ohio St.3d 427, 2012-Ohio-690, 966 N.E.2d 255, ¶ 17, quoting
Carlisle v. T & R Excavating, Inc., 123 Ohio App.3d 277, 283, 704 N.E.2d 39 (9th
Dist.1997) (“ ‘conditional gratuitous promises, which require the promisee to do
something before the promised act or omission will take place, are not enforceable
as contracts’ ”). Indeed, “ ‘[a] written gratuitous promise, even if it evidences an
intent by the promisor to be bound, is not a contract.’ ” Id., quoting Carlisle at 283.
Thus, the written materials announcing the limited availability of promotional items
to ticket purchasers who attend a particular game do not as a matter of contract law
establish a contract under which both sides furnish consideration.
       {¶ 50} The lead opinion’s interpretation of the evidence confuses the
business motive of the Reds to provide promotional items that have already been
promised with a contractual obligation to do so. The evidence demonstrates the
former but does not establish the latter.
                        Hyatt Corp. v. Limbach Is Apposite
       {¶ 51} My second point of disagreement with the lead opinion lies in its
attempt to distinguish our decision in Hyatt Corp. v. Limbach, 69 Ohio St.3d 537,
634 N.E.2d 995 (1994). In Hyatt Corp., a hotel operator that contracted with third-
party companies to launder the linens it supplied to its guests argued that the linen-
cleaning service was resold to its guests and therefore did not qualify as a “retail
sale” pursuant to R.C. 5739.01(E). Id. at 539. The hotel served two types of guests:
transient and long-term. Pursuant to R.C. 5739.01(B)(2), lodging furnished to
“transient guests” constitutes a sales-tax sale, but no provision makes the renting of
rooms to long-term guests a taxable transaction. Accordingly, this court held that
the sale-for-resale exception did not apply in situations involving long-term guests:


       The BTA correctly concluded that linen used in rooms rented to
       long-term guests was not resold. Under the statutes, renting these




                                            20
                                January Term, 2018




       rooms is not a sale because lodging is not sold to a transient guest,
       and, consequently, the cleaning service is not resold. Accordingly,
       this linen cleaning transaction is not excepted.


Hyatt Corp. at 540.
       {¶ 52} Although the lead opinion concedes that the Reds’ sale of game
tickets—like the sale of lodging to the long-term guests in Hyatt Corp.—is not a
sales-tax “sale,” it nonetheless determines that Hyatt Corp. is inapposite because
the evidence in this case reveals a specific bargain for the promotional items that
was supposedly absent when hotel guests rented rooms and thereby received the
benefit of clean sheets and linens in Hyatt Corp.
       {¶ 53} However, I disagree with the lead opinion’s conclusion that this
court in Hyatt Corp. “found that the linen-cleaning service was not a separate and
explicit part of the bargain by which lodging was provided,” lead opinion at ¶ 32,
and that Hyatt Corp. therefore is factually distinguishable from this case. In Hyatt
Corp., we explained that “[i]n a lodging transaction, the hotel transfers a full
sleeping room to its guest. This transfer includes the use of linens to sleep on and
to wash with.” Hyatt Corp. at 540. As a distinct component of the room rental,
“guests received the benefit of [the linen-cleaning] service in being able to use clean
linen.” Id.
       {¶ 54} Contrary to the lead opinion’s conclusion, Hyatt Corp.’s holding
should apply to this case. Because providing long-term lodging for consideration
was not a sales-tax sale, the hotel operator did not “resell” the benefit of cleaning
service to those guests. By the same logic, the Reds did not resell the promotional
items here, because the sale of game tickets was not a sales-tax sale. Consequently,
the Reds should, by the same reasoning as that applied in Hyatt Corp., be liable for
use tax as the consumer of the promotional items based on the Reds’ own purchase
of them.




                                          21
                             SUPREME COURT OF OHIO




       {¶ 55} In sum, the BTA’s decision should be affirmed. The Reds offered
and distributed the promotional items gratuitously; as a result, the Reds owed tax
as the purchaser and the use-tax consumer of the items. Accordingly, I respectfully
dissent.
       MAYLE, J., concurs in the foregoing opinion.
                               _________________
       Buckingham, Doolittle & Burroughs, L.L.C., Steven A. Dimengo, and
Richard B. Fry III, for appellant.
       Michael DeWine, Attorney General, and Daniel W. Fausey and Kody R.
Teaford, Assistant Attorneys General, for appellee.
                               _________________




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