“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.”

— Justice Pat Fischer

Cincinnati Reds L.L.C. v. Testa

“In this world, nothing can be said to be certain, except death and taxes.”

— Benjamin Franklin

Hop on I-71 and head down to the Cincinnati riverfront on May 4 next year, and you can not only get to see the Reds play the San Francisco Giants, but you can also take home a 150th anniversary Mr. Redlegs bobblehead. If you prefer a souvenir of a player, you can also take home a bobbling Ernie Lombardi (May 18), Joe Morgan (June 1), Barry Larkin (June 15), Tony Perez (July 27), Johnny Bench (Aug. 17) or Ken Griffey Jr. (Sept. 7).

Now what, you may be asking, does any of this have to do with the law? The answer is that those promotional bobbleheads became the subject of a major dispute between the Reds and the state Tax Commissioner. And that disagreement, which wound its way through the Board of Tax Appeals and several lower courts, was finally settled last week by a decision from the Supreme Court of Ohio.

The case, Cincinnati Reds L.L.C. v. Testa, circled around whether the Cincinnati Reds had to pay a separate “use tax” on items that they purchased to give away as promotions. Those things include bobbleheads, t-shirts, magnets, tote bags, towels, and other items that are given away to fans who attend selected Reds home games. The practice is common, and no fewer than a dozen Cleveland Indians bobbleheads sit atop the book shelf behind me as I write this column.

Tax law can be quite complicated in this area, but the simple question here was whether the promotional items are given away for free, or whether they are purchased by the Reds to be “resold” to the fans who attend those games. If the items were purchased to be resold, then the Reds don’t need to pay a use tax on them. That was the entirety of the dispute.

The Tax Commissioner, for his part, seemed to think that the answer was simple. Fans don’t buy the items. They don’t pay an extra charge for them. The ticket prices are not more expensive to the games at which the items are given away than they are to other games at which items are not given away. Under those circumstances, the Tax Commissioner thought it was obvious that the items were given away, not resold, and therefore the Reds needed to pay the tax.

Not so fast, said the Redlegs. While it’s true that they do not charge extra for the items, that’s not the complete analysis. They explained to the Board of Tax Appeals that they build the cost of the items into their ticket price schedule. They also argued that the freebies are intentionally given away at games that would otherwise have low attendance, and doing so prevents the need to lower ticket prices for those games. Thus, they argued, fans really are paying for those items, and the team shouldn’t have to pay a separate use tax on them.

The Board of Tax Appeals didn’t buy their argument, but five of the seven Justices of the Supreme Court did, and last week they ruled in favor of the Reds, who now don’t have to pay taxes on their bobbleheads. The decision, written by Justice Pat Fischer, is a wonderful read — sprinkled with baseball history, Reds lore, apt quotations, and some baseball humor. It also contains an excellent analysis of Ohio tax law that takes the Reds’ position that they are passing the cost of the promotional items on to fans, and thus the items are purchased for resale.

So, if you go to a baseball game next summer, or to a hockey, football or basketball game before then, and you come home with a “free” item, know that even the teams readily admit that they really are passing those costs on to you. After all, that admission gets them out of paying taxes.