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03/29/83 WISCONSIN DEPARTMENT REVENUE v. MILWAUKEE

March 29, 1983

WISCONSIN DEPARTMENT OF REVENUE, PETITIONER-RESPONDENT AND CROSS-APPELLANT
v.
MILWAUKEE BREWERS BASEBALL CLUB, APPELLANT AND CROSS-RESPONDENT-PETITIONER



Review of a decision of the Court of Appeals. Affirming Louis J. Ceci, J. Beilfuss, C. J. (concurring and Dissenting). Steinmetz, J. (minority OPINION(S)ing). Justice Callow joins this Dissent. Chief Justice Beilfuss joins the Dissent in part.

The opinion of the court was delivered by: Ceci

The issue presented is whether the use tax is properly assessed on the value of promotional items and admission tickets that are acquired by the taxpayer and transferred to its customers in connection with attending baseball games. The tax appeals commission held that the use tax did not apply to either item. The circuit court affirmed with respect to the admission tickets, but reversed on the issue of the promotional items, holding that they were subject to the use tax. The court of appeals ruled in favor of the assessment for both the tickets and the promotional items. *fn1 Because we conclude that, under the statutory framework of ch. 77, the sale of the tickets and promotional items by the out-of-state vendors to the Brewers constituted a taxable "sale" under sec. 77.51(4), Stats., *fn2 we affirm.

The pertinent facts in this case are not in dispute. The taxpayer, the Milwaukee Brewers Baseball Club, is a limited partnership engaged in the ownership and operation of a professional baseball franchise. The Milwaukee Brewers are a member team of the American League and play a schedule consisting of approximately 162 games during the regular baseball season. The baseball games played by the Brewers in Wisconsin (their "home games") are played at Milwaukee County Stadium. The remaining games are played outside Wisconsin against American League member teams located in various states. During the regular season, the Brewers have 81 home games for which they sell admission tickets on both a season ticket and an individual game basis.

During its fiscal years ending October 31 in 1971 through 1975, and between November 1 through December 31, 1975, the club purchased promotional items, such as baseball bats, helmets, jackets and seat cushions from out-of-state vendors for about $243,000. It transferred the promotional items to certain customers, for example, to children age fourteen and under, at some home baseball games.

During the same periods, the club also purchased printed tickets from out-of-state vendors for use in selling admissions to its Milwaukee games. The tickets cost the club approximately $108,000 at a unit cost of approximately one cent each.

The Brewers filed Wisconsin sales and use tax returns for each of the periods in question. As a result of a field audit of the books and records of the club, the department of revenue issued a notice of sales and use tax deficiency determination dated March 24, 1976. The notice stated that total additional sales and use taxes and interest in the amount of $27,367.96 were due. The Brewers filed a petition for redetermination of the assessment. On September 24, 1976, the club's petition for redetermination was granted in part and denied in part by the department.

In its final determination, the department increased the club's use tax base by $107,979, which represented amounts paid by the club during the periods in issue to an out-of-state vendor for the purchase of the admission tickets. *fn3 The department also increased the use tax base by $242,540 for amounts paid by the Brewers to various out-of-state vendors for the different types of promotional items. *fn4

The Brewers appealed the additional assessment to the Wisconsin Tax Appeals Commission. In an October 27, 1980, decision, the commission reversed the action of the department and ruled that the Brewers' acquisition of the tickets and the promotional items were not taxable events. The commission concluded that the acquisition of the admission tickets by the club did not constitute retail sales within the meaning of sec. 77.51(4), Stats., reasoning that the costs of the admission tickets were already subject to the sales tax on the price of admission to a game. The commission similarly concluded that the promotional items were not acquired in separate retail sales within the meaning of sec. 77.51(4), Stats., since the items were included in the price of admission on which a sales tax was paid.

The department then sought judicial review of the commission's decision in the Dane county circuit court. The court affirmed with respect to the cost of the tickets and reversed with respect to the cost of the promotional items. The circuit court reasoned that the ticket was the permission to enter the stadium and is what the customer paid for; thus, it had been taxed under sec. 77.52(2), Stats. *fn5 However, the court held that while the transfer of a promotional item may be an inducement for the purchase of the service (admission to the event), it is not a sale or part of the sale recognized by sec. 77.52(2) (a)2, Stats. Therefore, the court considered the distribution of the promotional items to be taxable to the Brewers under sec. 77.51(4) (k), Stats. *fn6

The court of appeals reversed on the issue of the tickets. The court held that sec. 77.51(24), Stats., *fn7 precluded the Brewers from allocating any part of the admission price to either the tickets or the promotional items. The court of appeals reasoned that

"a person who acquires property to give it away is a user or consumer as opposed to a reseller, and is liable for the use tax." 108 Wis. 2d at 558.

I.

PROMOTIONAL ITEMS

We agree with the court of appeals that the promotional items were not for resale and that, therefore, their acquisition by the Brewers was a taxable event. Our Conclusion is based on what we believe to be the clear ...


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