Wisconsin Dept. of Revenue v. Milwaukee Brewers Baseball Club

• Decision Date: 29 March 1983
• Docket Number: No. 81-1875,81-1875
• Parties: WISCONSIN DEPARTMENT OF REVENUE, Petitioner-Respondent and Cross-Appellant, v. MILWAUKEE BREWERS BASEBALL CLUB, Appellant and Cross-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

Page 383

331 N.W.2d 383

111 Wis.2d 571

WISCONSIN DEPARTMENT OF REVENUE, Petitioner-Respondent and Cross-Appellant, v. MILWAUKEE BREWERS BASEBALL CLUB, Appellant and Cross-Respondent-Petitioner.

No. 81-1875.

Supreme Court of Wisconsin.

Argued Feb. 28, 1983.

Decided March 29, 1983.

Ronald L. Walter, Milwaukee, argued, for appellant and cross-respondent-petitioner; David A. Baker and Foley & Lardner, Milwaukee, on brief.

John J. Glinski, Asst. Atty. Gen., argued, for petitioner-respondent and cross-appellant; Bronson C. La Follette, Atty. Gen., on brief.

CECI, Justice.

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. ¹ 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 section 77.51(4), Stats., ² 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. ³ 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. ⁴

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 section 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 section 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 section 77.52(2), Stats. ⁵ 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 section 77.52(2)(a)2, Stats. Therefore, the court considered the distribution of the promotional items to be taxable to the Brewers under section 77.51(4)(k), Stats. ⁶

The court of appeals reversed on the issue of the tickets. The court held that section 77.51(24), Stats., ⁷ 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, 322 N.W.2d 528.

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 language contained in the statutory framework of ch. 77.

As we have previously noted, the facts in this case are not in dispute, and only questions of law remain. Questions of law such as statutory construction are reviewable ab initio by this court and are properly subject to judicial substitution of judgment. American Motors Corp. v. ILHR Dept., 101 Wis.2d 337, 353-54, 305 N.W.2d 62 (1981); H. Samuels Co. v. Dept. of Revenue, 70 Wis.2d 1076, 1083-84, 236 N.W.2d 250 (1975).

Several statutory sections are pertinent to the question of taxability of tangible property purchased from an out-of-state retailer. Section 77.51(7)(a), Stats.1975, defines "retailer" as including "[e]very seller who makes any sale of tangible personal property or taxable service." Under section 77.51(4), Stats.1975, "sale" is defined as including the "enjoyment of tangible personal property or services for use or consumption but not for resale...." Section 77.53(2), Stats.1975, provides that any person storing, using or otherwise consuming tangible personal property purchased from a retailer is liable for the tax imposed. "The purpose of the use tax is to prevent a buyer from avoiding a sales tax by purchasing goods outside the state." Dept. of Revenue v. Moebius Printing Co., 89 Wis.2d 610, 621-22, 279 N.W.2d 213 (1979).

The Brewers argue that because the promotional items are tied to the price of admission, they are being sold at the retail level and are, therefore, already subject to the sales tax. The problem with this argument is that the price of admission to athletic events is taxed as a service under section 77.52(2)(a)2, Stats., and that section 77.51(24), Stats.1975, provides:

"With respect to the services covered by s. 77.52(2), no part of the charge for the service may be deemed a sale or rental of tangible personal property."

We agree with the court of appeals that the plain meaning of this provision is that under ch. 77, no part of the Brewers' admission charge is allocable to a sale of the promotional items. Thus, no resale occurs when the item is transferred to the game patron. 108 Wis.2d at 557.

The Brewers contend that section 77.51(4)(k), Stats., is controlling and that a logical interpretation of its language excludes the Brewers' acquisitions from the definition of a "retail sale." Section 77.51(4)(k), Stats.1975, provides that the following will qualify as a "retail sale," for use or consumption but not for resale:

"Any sale of tangible personal property to a purchaser even though such property may be used or consumed by some other person to whom such purchaser transfers the tangible personal property without valuable consideration, such as gifts, and advertising specialties distributed gratis apart from the sale of other tangible personal property or service." (Emphasis added.)

The club argues that this section deals specifically with the question of true "giveaways" by a retailer, such as matches, calendars, pens or athletic schedules which are given for the asking, unrelated to a particular sale. From this, the club argues that the acquisition of a product for transfer in conjunction with the sale of another product or service does not constitute a retail sale. We agree with the court of appeals that this claimed negative implication does not exist. Rather, sub. (4)(k) clarifies 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, 322 N.W.2d 528.

The Brewers contend that the court of appeals' holding is inconsistent with the department's interpretation of section 77.51(4)(k), Stats., as enunciated in a department Technical Information Memorandum S-52.1 (TIM), which states in part:

"1. Gifts and Advertising Specialties

Persons who make gifts of personal property to others are the consumers of the property and the tax applies to the sale of the property to such persons. This would include sales of samples, advertising...