FILED

December 4, 1998

Cecil W. Crowson

Appellate Court Clerk

GEHL CORPORATION, )

)

Plaintiff/Appellant, ) Appeal No.

) 01-A-01-9803-CH-00165

v. )

) Davidson Chancery

RUTH E. JOHNSON, ) No. 95-3343-III

Commissioner of Revenue for the )

State of Tennessee, )

)

Defendant/Appellee. )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE DAVIDSON COUNTY CHANCERY COURT

AT NASHVILLE, TENNESSEE

THE HONORABLE ELLEN HOBBS LYLE, CHANCELLOR

WILLIAM H.D. FONES, JR.

JANIS WILD KESSER

Baker, Donelson, Bearman & Caldwell

2000 First Tennessee Building

Memphis, Tennessee 38103

ATTORNEYS FOR PLAINTIFF/APPELLANT

JOHN KNOX WALKUP

Attorney General & Reporter

STACY E. GIBSON

425 Fifth Avenue North

Cordell Hull Building, Second Floor

Nashville, Tennessee 37243-0489

ATTORNEYSFOR DEFENDANT/APPELLEE

AFFIRMED AND REMANDED

WILLIAM B. CAIN, JUDGE
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O P I N I O N

Gehl Corporation filed suit in the Chancery Court of Davidson County to

contest an assessment by the Commissioner of Revenue of the "Amusement Tax"

imposed by Tennessee Code Annotated section 67-6-212(a)(2).

Gehl received a notice of assessment dated July 20, 1995 notifying it that

it had been assessed for sales and use taxes for the period December, 1990

through September, 1994. Gehl chose not to pay this assessment and filed suit

pursuant to Tennessee Code Annotated section 67-1-1801 requesting the court

to set aside the assessment. At issue is an assessment for tax in the amount of

$361,795.00, together with penalty and interest totaling $557,231.00 as of July

20, 1995.

The Gehl Corporation engages in two major activities in Tennessee. In

addition to promoting and organizing tours for several Country Music stars, The

Gehl Corporation entered into contracts with the Memphis Firefighters’

Association, Nashville Firefighters Association and Clarksville Professional

Firefighters, regarding benefit concerts. The record reveals that the contracts

executed by the representatives of the three firefighters’ associations

(denominated in the agreements as “COMMITTEE”) and Gehl (denominated in

the agreements as “SHOW”) are substantially similar. 

The associations and Gehl, in an attempt to raise money for the association

and to earn a profit for Gehl, arranged to put on a number of benefit concerts on

behalf of the association. As an example, the contract with the Memphis

Firefighters Association states in pertinent part:

2. The COMMITTEE hereby grants and extends to the SHOW

the use of its good name, goodwill and cooperation to stimulate the

sale of tickets and advertising and its complete cooperation in

presenting six (6) fund raising events, ... .

3. The SHOW agrees to provide a campaign manager who shall

direct a campaign for the sale of admission tickets and

advertisements in connection with the above-mentioned attraction.

All sales work, in connection herewith, shall be done by sales

manager and/or his employees and shall be done by letter, personal
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contact or telephone.

4. Said campaign manager shall receive forty percent (40%)

(gross) of the monies derived from his sales and/or the sales of his

employees. Said percentage shall be paid to the campaign manager

weekly, but shall only be paid on monies collected and deposited

with the COMMITTEE. Said percentage shall be compensation in

full for his services and the services of everyone employed by the

campaign manager.

. . .

5. Campaign manager shall assume, in full, that portion of the

campaign operating costs which specifically includes the following

items: Office personnel, sales personnel and delivery personnel.

a) All monies collected from any source whatsoever under

the terms of this Agreement shall be made payable to the

COMMITTEE, and shall be mailed or delivered each week during

the continuance of this Agreement to the duly appointed officer of

the COMMITTEE.

b) All monies collected are to be deposited in a special

checking account in a bank of COMMITTEE’s choice. It will be

necessary to have two (2) signatures on all checks disbursed, one

from the COMMITTEE and one representing the SHOW.

6. All costs incurred in connection with the fulfillment of the

terms of this Agreement shall be paid out of the monies grossed and

said costs shall be paid in full, prior to the division of profits

according to the terms herein stated. Said costs shall consist of the

following:

a) The cost of the attraction shall be actual.

b) Additional expenses shall be: Office rental, telephone

service, liability insurance, printing, rental costs of the theatre[sic]

or auditorium, postage, and any other costs directly related to and

incurred under the terms of this agreement.

. . .

7. After all costs, as outlined above, have been paid and after

sales taxes have been paid, the amount remaining shall be the net

profit and shall be divided as follows:

a) The COMMITTEE shall receive the first Twenty

Thousand Dollars ($20,000.00) of the net profit per event, and the

SHOW shall receive the next ($20,000.00) of the net profit, per

event.

b) All additional monies shall be divided equally fifty percent

(50%) [to] the COMMITTEE and fifty percent (50%) to the SHOW.
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. . .

 9. Should a deficit occur as a result of this agreement, SHOW

agrees to assume all responsibility for the payment of all liabilities

incurred and COMMITTEE shall in no way whatsoever be liable

for same.

Gehl would appoint the campaign manager, whose job it was to solicit, primarily

by phone, the purchase of tickets for the charity events presented on behalf of the

associations.

In the action below challenging that assessment, both Gehl Corporation

and the Commissioner filed motions for summary judgment. Gehl Corporation

comes to us to review Chancellor Lyle’s order granting summary judgment for

the Commissioner and denying Gehl Corp.’s cross-motion. Our standard of

review in this case is accordingly de novo with no presumption of the correctness

of the trial court action. Cowden v. Sovran Bank/Central South, 816 S.W.2d

741, 744 (Tenn. 1991) and Hembree v. State, 925 S.W.2d 513, 515 (Tenn. 1996).

Gehl Corp. urges the following issues on appeal:

1. Whether the trial court erred in denying Gehl’s Motion for

Summary Judgment by finding that Gehl was a taxpayer and not an

agent of the firefighters.

2. Whether the trial court erred by finding that the proceeds of

the ticket sales to concerts presented pursuant to agreements with

non-profit labor organizations were not exempt from the

amusement tax pursuant to T.C.A. § 67-6-330 (a) (7) and/or (16).

3. Whether the trial court erred by finding that the proceeds of

the ticket sales were taxable admissions. 

I. Agency

Gehl’s first two issues hinge on the main question of whether or not Gehl

Corp. was an agent of the charitable firefighter organizations. If Gehl was

indeed acting as an agent, then the entity conducting the ticket sales was actually

the Nashville, Memphis and Clarksville Firefighters’ Associations respectively.

In addition, if Gehl was acting under the direction of these associations in

producing, promoting and controlling these concerts, then the charitable

organizations are the principals. In any event, should agency exist, then no tax
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is owed on the proceeds from these ticket sales.

Two universal rules of agency appear with regularity in the cases of our

jurisdiction. The first recognizes the element of benefit to the principal of the

agency relationship. In an agency relationship, the agent carries on a business

for the benefit of its principal. See e.g. Nidiffer v. Clinchfield R. Co., 600

S.W.2d 242, 245 (Tenn. App. 1980); Jack Daniel Distillery, Lem Motlow Prop.

v. Jackson, 740 S.W.2d 413, 416 (Tenn. 1987). The second rule, and the most

significant rule for the case at bar, is stated most succinctly by Judge Franks,

writing for the Eastern Section in Nidiffer:

...[T]he principal test of agency is whether the principal has the

right to control the conduct of the agent with respect to matters

entrusted to the agent. It is said this right of control is the primary

or the essential test of an agency relationship without which no

agency exists. 2A C.J.S. Agency § 6, at 560 through 561. Accord:

3 Am.Jur.2d, Agency, § 2.

Nidiffer v. Clinchfield R. Co., 600 S.W.2d 242, 245 (Tenn. App. 1980)

The record reveals no such right of control on the part of the firefighters’

associations. With regard to the sales of tickets, Gehl was in charge of the

selection of a campaign manager. We find the depositions of Firefighter Danny

Todd and Fire Captain Billie Hall enlightening as to the supposed right of the

associations to control Gehl’s fundraising activities. Firefighter Todd represents

the Memphis Firefighters Association; Captain Hall represents the Nashville

Firefighters Association. With regard to the campaign manager, Firefighter

Todd stated in his deposition as follows: 

Q. Have you had involvement in the hiring or firing of campaign

managers?

A. I guess definition of involvement, but had discussions about

different managers over the years and, you know, who was coming

or more importantly when it was time to make a change in Show

Fund managers I’ve had some discussions and input into when a

change was made with the supervisors and the other employees of

-- the owners of the Gehl Group.

Captain Hall had this to say regarding the selection of a campaign manager:

Q. And who did you work with from The Gehl Corporation?
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A. There have been several individuals over the years. I’ve

worked with Frank Stevens. I’ve worked directly with Joe Gehl at

times. One time it was a gentleman, Forrest Ferguson. The

gentleman that’s there now, I’ve worked briefly with. I think his

name is Tom, if I’m not mistaken.

. . .

Q. ...Theindividuals you mentioned just a minute ago, were they

the campaign managers hired by Gehl, or were they other

individuals?

A. Of course, Gehl owns the business. Frank Stevens is a partner

or something in the business. He’s not a campaign manager.

Forrest Ferguson was the campaign manager, and Tom is the

campaign manager that runs the show fund office.

Q. Do they generally hire a separate campaign manager every

year? How does that work? How often does that change?

A. Probably, it’s been more stable now than it has in the past.

At one time, it was not very stable. We were more or less

designated, for some reason -- I have no reason to be a trainer for

managers or whatever. That caused us various problems, and we

told them that we didn’t like that arrangement, that we wanted

someone that we could have a relationship with, you know, that we

knew on a day-in and day-out basis.

Q. Let me make sure I understand. You were getting several

different managers because you were kind of a training ground; a

person would learn in Nashville and then move on?

A. Right. If it was a good manager consequently -- we knew he

was going to move on whether he was good, bad, or in between.

We didn’t like that particular relationship.

Q. You said you expressed that to Gehl?

A. The Gehl Group, yes, ma’am.

Q. Did they change their policy on that?

A. Yes, ma’am. I think probably since then we’ve probably had

two managers, maybe an interim manager between one or the other

but basically two managers.

Q. Are the fire fighters involved at all in choosing a manager?

A. We have approval, you know. If it is someone that, for some

reason, we just didn’t get along with gee-haw with or whatever,

they would have to go.
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The testimony of these witnesses taken as a whole fails to estsablish any

right of control on the part of the firefighters’ associations. These campaign

managers, chosen by Gehl subject to the approval from the charitable

associations, were in charge of the solicitation of ticket sales by other employees

of Gehl. 

Concerning the actual production and direction of the concerts, the

associations relied on Gehl’s expertise in this area as well. The leasing of the

auditoriums, contracts for lighting and sound, negotiation with the acts involved,

all of these activities were undertaken by Gehl. The record regarding the parties

conduct shows no evidence of the control required for Gehl to be considered an

agent of the associations.

Both Gehl and the Commissioner refer us to our previous decision in

Raskin Co. v. Johnson, 1998 WL 24260 (May 15, 1998). For the reasons

articulated above, we find the case at bar distinguished on its facts. In Raskin,

the City exercised control over personnel, food-service, green fees on land

owned by it and operated by the Raskin Company. These items are classic

indicia of control by a principal over an agent’s duties. Whereas the

Municipality suffered the risk of loss attendant to having an agent manage its

real property, the firefighters associations in the case at bar bore no risk of loss.

In sum, this situation falls under the application of the rules of agency set

forth in United States v. Boyd, 211 Tenn. 139, 363 S.W.2d 193 (1962). In Boyd,

several subcontractors of the Atomic Energy Commission of the United States

were seeking to avoid tax liability by virtue of a supposed agency relationship

with the federal government. The contractors were assessed sales tax on items

purchased for the benefit of the government as well as use tax assessed on

equipment utilized by the subcontractors themselves. In determining the

question of agency existence for the purpose of taxing equipment, the court

found that the entities involved were chosen by the government for their

expertise. The contracts involved suggested that these entities would use their

specialized expertise to obtain a goal for the A.E.C.. The subcontractors were

left to their own devices within their relative fields of expertise. The relationship

involved was purely goal-oriented. The A.E.C. had no right to control the
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subcontractors within their respective fields, so no agency existed. United States

v. Boyd, 211 Tenn. 139, 159, 363 S.W.2d 193, 202 (1962).

The chancellor held and the record without dispute discloses:

While the record before the court establishes that the firefighters are

allowed to make requests and have input, they have no authority to

fire employees or change entertainers or fire telemarketers. The

stipulations filed with the court used the term "requests" or "asks"

in describing the firefighters role, relationship and control with

respect to Gehl Corporation. Additionally, the firefighters are not

paying Gehl such as one would expect with an agent. Gehl is paid

profits out of the account. Thus, Gehl has failed to carry its burden

of demonstrating by clear and convincing evidence that it is the

agent and not the actual entity which should be taxed.

Such is the burden that rests upon the taxpayer. Edmonson Management

Services, Inc. v. Woods, 603 S.W.2d 716 (Tenn. 1980) and Stratton v. Jackson,

707 S.W.2d 865 (Tenn. 1986).

II. Exemption under T.C.A. § 67-6-330(a)(7) or (16)

There is exempt from the sales tax upon admission, dues or fees imposed

by § 67-6-212 [Amusement Tax]:

(7) Gross proceeds derived from admissions to amusement or

recreational activities or facilities conducted, produced or provided

by:

(C) Organizations listed in Major Group No. 86 of the Standard

Industrial Classification Manual of 1972, as amended, prepared by

the office of management and budget by the federal government;

provided that this exemption shall not apply unless such entities,

societies, associations or organizations promote, produce and

control the entire production or function; . . .

Further, T.C.A. § 67-6-330(16) also exempts:

Gross proceeds derived from admissions to musical concerts

conducted, produced or provided by not-for-profit community

group associations if such associations promote, produce and

control such concerts; . . .

It is indisputable that Gehl does not qualify for exempt status under these

statutory provisions as it is neither a Major Group No. 86 organization nor the

agent of such an organization.
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Such exemptions are strictly construed against the taxpayer. Tibbals

Flooring v. Huddleston, 891 S.W.2d 196, 198 (Tenn. 1994).

As demonstrated in the authorities cited above, summary judgment in

favor of the Commissioner on the issue of agency was proper. While it is true

that courts may look beyond the four corners of agreements with third parties to

determine the supposed agency status of the taxpayer, Boyd supra; in the case

at bar, such investigation only proves to reinforce the impression established by

the contracts in question. Gehl was not an agent, but rather a purchaser of good

will and sponsorship.

III. Tickets as Donations

The last issue Gehl raises on appeal questions the nature of the actual

ticket sales. Gehl of course contends that at least a portion of these ticket

purchases represent pure donation. Without discussing the portion of tickets

used, the fact remains that individuals in Clarksville, Memphis and Nashville

have given money and received in exchange therefor the right to admission to the

concerts promoted in their respective city. While the odds on every ticket-holder

exercising this right at the same time are slight; in truth, every person

successfully solicited for a ticket has purchased a right, and that purchase is

taxable under Tennessee Code Annotated section 67-6-212(a)(2). 

67-6-212. Amusement tax. -- (a) There is levied a tax at a rate

equal to the rate of tax levied on the sale of tangible personal

property at retail by the provisions of § 67-6-202 of the gross

receipts or gross proceeds of each sale at retail of the following: 

. . .

(2) Sales of tickets, fees or other charges made for admission to or

voluntary contributions made to places of amusement, sports,

entertainment, exhibition, display or other recreational events or

activities, including free or complimentary admissions when made

in connection with a valuable contribution to any organization or

establishment holding or sponsoring such activities which shall

have the value equivalent to the charge that would have otherwise

been made;

Tenn. Code Ann. § 67-6-212 (1998).

IV. Disposition

The order of the chancellor granting summary judgment in favor of the
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commissioner is affirmed in all respects. The cause is remanded to the trial court

for proceedings pursuanttoTennesseeCodeAnnotated section 67-1-1803(d) and

such further action as may be necessary. Costs of the appeal are taxed against

Gehl Corporation. 

________________________________

WILLIAM B. CAIN, JUDGE

CONCUR:

____________________________________

BEN H. CANTRELL, PRES. JUDGE, M.S. 

____________________________________

HENRY F. TODD, JUDGE