# FILED

December 4, 1998 Cecil W. Crowson Appellate Cou rt Clerk GEHL CORPORATION, ) ) Plaintiff/Appell

ant, ) Appeal No.

) 01-A-01-9803-CH-00165 v. ) ) Davidson Chancery RUTH E. JOHNSON, ) No. 95-3343-III Commissione

r of Revenue for th

e ) State of Tennessee, ) ) Defendant/Appellee. )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE DAV IDSON COUNTY CHANCE RY COURT AT NASHVILLE, TENNESSEE
THE HONORABLE ELLEN HOBBS LYLE, CHANCELLOR

WILLIAM H.D. FON

ES, JR. JANIS WILD KESSER Baker, Donelson,

Bearman & Ca

ldwell 2000 First Tennesse

e Building Memphis, Ten

nessee 38103 ATTORNEYS FOR PLAINTIFF/APPELLANT

JOHN KNOX WALKUP Attorney General & Reporter STACY E. GIBSON 425 Fifth Avenue No

rth Cordell Hull Buildin

g, Second Floor Nashville, Tennessee 37243-0489 ATTORNEYSFOR DEFENDANT/APPELLEE

AFFIRMED AND REMANDED

WILLIAM B. CAIN, JUDGE-2- 

## O P I N I O N
Gehl Corporation filed su it in the Chancery C

ourt of Davidson County t

o contest an assessment by

the Commissione

r of Revenue of the

"Amusem

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

Gehl received a notice of assessm ent dated July 20,

1995 notifying it

that ithad been assessed fo

r sales and use taxe s for the period De cember, 1990 through Septembe

r, 1994. Gehl

chose not to pay this assessment and filed suit pursuant to Tennesse

e CodeAnnotated section 67-1-1801 requesting the court to set aside the assess

ment. At issue

is an assessmen

t for tax i n the amount of $361,795.00, together with penal ty and interest t

otaling $557,231.00 as of July 20, 1995.

The Ge hl C orporation engages in two major activities in Tennessee. In addition to promoting and organiz ing tours for severa

l Country Music stars , The Gehl Corporation entere d into contracts wit

h the Memphis F

i refighters’ As sociation, Nashville Firefi ghters Association a

nd Clarksville Prof

essio na l Firefighte rs , regarding benefit c

oncerts. The re

cord reveals that t

he contracts executed by the represen tatives of the three fire fighters’ associat

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

inated in the agreements as “SHOW”) are s ubstantially si milar.

The associations and Ge

hl, in an attempt to r

aise money for the a

ssociation and to earn a profit fo

r Gehl, arrange

d to put on a number of be nefit concerts on b e half of the association.As an example, th e contract with the

Memphis Firefighters Ass ociation states in per tinent part:

2. The COMMITTEE hereby grants and

extends to the SHOW the use of its good name, goodw ill and cooperation to stimul

ate the sale of tickets and advertising and its complete coopera tion in presenting six (6 ) fund raising event s, ... . 3. The SHOW agrees to provide acampaign manager who shall directa campaign for the sale of admission tic kets and advertisements

in connection with the a

bove-mentioned attr

action. All sales work, in connection herewith, shall be done by sales manager and/or his employees and shall be done by letter, personal-3- contact or telephone. 4. Said

campai gn manager shall receive fo rty percent (40%) (gross) of the monies derive d from his sales and/or the sales of h is employees. Said percentage s hall be paid to the

campaign manager weekly, but sh all only be paid on monies collected and deposited withthe COMMITTE

E. Said percent

age shall be compensa

tion in full for his services and the se rvices of everyone employed by the campaign manager.

. . . 5. Campaign manager s hall assume, in full, that portion of the campaign operating costs whic

h specifically

includes the following items: Office pe

rsonnel, sales per

sonnel and delivery pe

rsonnel. a) All monies co llec ted from any source whatsoever under th e ter ms of this Agreeme nt shall be made paya ble to the COMMITTEE, and shall be mailed or delivered each week during the continuance of this Agreement to the duly appointed office r of the COMMITTEE. b) All monies collect

ed are to be de

posited in a special checking account in a ba nk of C OMMITTEE’ s choice. It will be necessary to have two (2) signa tures on a l l checks disbursed, one from the COMMITTEE and one representing the SHOW. 6. All costs incurred in con nection with the ful fillment of the terms of this Agreement

shall be paid out of the monies g rossed and saidcosts shall be paid in f ull, prior to

t he division of profits accordingto the terms herein stated. Sa id costs shall consist of the following: a) The cost of the

attraction shall be

actual. b) Additional expens es shall be: Office renta l, teleph one service, liability insurance, printing, rental costs of the theatre[sic] or auditorium, postage, and any othercosts directly related to and incurred under the t

erms of this agree

ment.

. . . 7. After

al l c osts, as outlined above, have been paid and after sales taxes have been paid, the amount remai ning sha ll be the net profit and shall be div

ided as follows:

a ) The COMMITTEE shall receive the fi rst Twe nt y Thousand Dollars ($20,000. 00) of the net profit per event, and the SHOW sha ll receive the next ($20,000.00) of the net profit, per event. b) All additional monies shall be divided eq ually fi fty percent (50%) [to] the COMMITTEE and fifty percent (50%) to the SHOW.-4- . . . 9. Shou ld a deficit occur a s a result of this

agreement, SHOW agrees to assume all respons ibility for the

payment of all liabilities incurred a nd COMMITTEE shall in no way what

soever be liable for same.

Gehl would appoint

the campaign manager, whose job it was to solicit, primar ily by phone, the purchase

of tickets for the

charity events presented on behalf of the associations.

In the action below chal lenging that asse ssment, b oth Gehl Corporation and the Commissionerfiled motions for sum mary judgment. Ge

hl Corporation
comes to us to review Chancellor Lyle’s order granting summary judgment for the Commissioner and den ying Gehl Corp.’s c

ross-motion. Our s

tandard of review in this case is accordingly de novo with no presump tion of the correctness of the trial court actio n. Cowden v. Sovran Bank/Central Sout

h , 8 16 S. W.2d 741, 744 (Tenn. 1991) an

d Hembree v. State , 925 S.W.2d 513, 515 (Tenn. 1996).
Gehl Corp. urges t

he following issues on appeal: 1. Wh eth er

the trial court er

red in denying Gehl’ s Motion for Summary Judgment byfinding that Gehl was a taxpayer and not an agent of the firef

ighters. 2. Whether

the trial court er

red by finding that the

proceeds of the ticket sales to conc

erts presented purs

uant to agr

eements with n on -profit

labor organizations

were not exempt f

rom the amusement tax pursuant to T.C.A. § 67-6-330 (a) (7) and/or (16). 3. Whether

the trial court er

red by finding that the

proceeds of the ticket sales were tax able admissions.

I. Agency Gehl’s first two issues hinge on the mai n question of whether

or not Gehl Corp. was an agent of the chari table firefighter org anizations. If Gehl was indeed acting as an agent, then th e entity conducting the t

icket sales was ac

tually the Nashville, Memph

is and Clarksville F

irefighters’ Ass ociations respectiv ely. In addition, if Gehl was acting under the direction of thes e associa tions in producing, promoting and control li ng these concerts,

then the charitable organizationsare the principals. In any event, should agency exist, then no tax-5-

is owed on the procee

ds from these ticket

sales.

Two universal rules of a

gency appear with r

egularity i n the cases of our jurisdiction. The first recognizes the element of benefi t to th e principal of the agency relationship. In an agency relationship, the agent carries on a b usiness for the benefit of its pri ncipal. See e.g. Nidif fer v. Clinchf

ield R. Co. , 60 0 S.W.2d 242, 245 (Tenn. App. 1980); Jack Daniel Distil lery, Lem Motlow

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

rule for the case

at bar, is stated m

ost succinctly by Judge F ranks, writing for the Ea

stern Section in Nidiffer :
...[T]he principal test of ag

ency is whether the

principa l has th e 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. Cli

nchfield R. Co. , 600 S.W.2d 242, 245 (Tenn. App. 1 980) The record reveals no

such right of control o

n the partof the firefighter s’ associations. With regard to the s ales of tickets, G ehl was in char ge of the selection of a campaign

manager. We fi

nd the depositions of

Firefighter Da

nny T odd and F ire Captain Billie Hall enlightening as

to the supposed right of

the associations to controlGehl’s fundraising activities. Fire

fighter Todd repr

esents the Memphis Firefighte

rs A ssociation; Captain H all represents the

Nashville Fire fighters Association. Wit h regard to the cam

paign manager, Fi

refighte r Todd stated in his depos

ition as follows:
Q. Haveyou had involvement in the hiring or firing of campaign managers? A. I guess definition of involvement, but had discussions about different managers over the y

ears and, you

know, who was coming or mor e importantly when i t was time to make a

change in Show Fundmanagers I’ve ha

d some discussions and inp ut into when a changewas made with the supervisors and the other employees of -- the owners of t

he Gehl Group. Captain Hall had this to say regarding the selection of a campaign manager: Q. And who did you work w ith from The Gehl

Corporation?-6- A. There have been several i ndividuals over the yea

rs. I’ve worked withFrank Stevens. I ’ve worked direct ly with Joe Gehl at ti mes. One time it was a gentleman, Forrest Ferguson . Th e ge ntleman that’s there now, I’ve worked brie

fly with. I thi

nk hi s name is Tom, if I ’m not mistaken.

. . . Q. ...The i ndividuals you mentioned just a minute ago, were the y the campaign managers hired by Gehl, or

wer e they other individuals? A. Of course, Gehl ow

ns the business. Fra

nk Stevens is a partner or something in the busines s. He’s not a cam paign m an ager. Forrest Ferguson was the cam paign 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 sta b le now than it has in th

e past. Atone time, it was no t ve ry stab le. We were m ore or less designated, for some reas on -- I have no reason to be a tra

iner for managers or whatever. T hat cau sed us various pro blems, and we told them that we didn’t like that arr ange ment, that we wanted someonethat we could have a relationship with, you know, thatwe knew on a day-in and da

y-out basis. Q. Let me make sure I understand. You were get ting s everal different managers because

you we re kind of a training ground; a person would learn i

n Nashville and then m

ove on? A. Right. If it was a good manager consequently -- we knew he was going to move on whethe r he was good, bad,

orin between. We didn’t like that pa

rticular relationship. Q. You said you expresse d that to Gehl? A. The Gehl Group, yes, ma’am. Q. Did they change thei r 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 ma

nagers. Q. Are the fire fighters involved at all in choosing a manager? A. We have approval, you kn ow. If it is someo

ne that, for some reason, we just didn’t get al ong with gee-haw with or whatever, they would have to go.-7- The testimony of these w itnesses taken as a w

hole fails to estsabl

ish any right of control on the part of the firefighters’ as sociat ions. These campa ign managers, chosen by Gehl subjec t to the approval fro

m 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 concer ts, t he
a ssociations relied on Gehl’s expertise in this area as well. The leasing of th e auditoriums, contracts for light ing and sound, negotiati

on 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 associa

tions.

Both Gehl and the Commissioner refer us to our previous deci sion in Raskin Co. v. Johnson , 1998 WL 24260 (May 15, 1998). For the

reaso n s articulated above, we find the case at bar dist

inguished on

its facts. In Raskin , the City exer cised control over pe rsonnel, food-ser

vice, green fee s on land owned by it and operated b y the Raskin Compan y. Thes e items are classi c indicia of control by a principal over an agen t’s duties. Where as the Municipality

suffered the risk

of loss attendant to having an a gent manage its real property, the fir

efighters associat

ions in the case

at bar bore no risk of loss.

In sum, this situation fa

lls under the applicatio

n of therules of agency set forthin United States v. Boyd , 211 Tenn. 139, 363S.W.2d 193 (1962). In Boyd , several subcontractors of th e Atomic Energy

Commission

of the United States
were seeking to avoid tax lia bility by virtue of a sup

posed a gency relationship withthe federal gover

nment. The contractors were assessed sales taxon items purchased for the benefit of the government as w ell as use tax assessed on equipment

utilized by the su

bcontractors themselve s. In determining t he question of agency existence for the purpose of taxing equipment, the court fou nd that the entities invol ved were chosen by t

he government for th

e i r expertise. The contracts involved suggested that these entities w ould use their specialized expertise to obtain a goal for the

A .E.C.. The subcontractors were leftto their own device s within their rela tive fields of exper

tise. The relat

ionship involved was purely goal-or iented. The A. E.C. had no right to control t he-8-

subcontra ct ors within their respect ive fields, so no age ncy existed. United States v. Boyd , 211 Tenn. 139, 159, 363 S.W.2d 193, 202 (1962).

The chancellor he

ld and the record w

ithout dispute discloses : Whilethe 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 telemar keters . The stipulations filed with the cour t used the term "re

quests" or "asks" in describi ng the firefighters role , relationship and c ontrol with respect to Gehl Corporation . Additionally, the firefighters are not paying Gehl such as one

would expect with a

n agent. Gehl is pa

id profits out of

the account. Thus, Gehl has failed to carry its burden of demo nstr ating by clear and co nvincing evidence tha

t it is the agent and not the actu

al 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) an

d Stratton v. Jackson , 707 S.W.2d 865 (Tenn. 1986).

II. Exemption unde

r 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 der

ived from admissions t

o amuse ment or recreational activities or facilities condu cted, produced or provided by: (C) Organizations list

ed in Major Group N

o. 86 of the Standard Industrial Classification Manual of 1972, as amended, prepared by the office of mana

gement and budget by the federal governme

nt; provided that this exemption sha ll not apply unless such ent ities, societies, associations or organizat ions promote, produce a nd control the entire p roduction or funct ion; . . . Further, T.C.A. § 67-6-330(16) also exe mpts: Gross proceeds derived f rom admissions to musical concerts con duct ed, produced or provided b y not-for-profit c

ommunity group a ssoc iations if such associ ations promote, prod

uce and control such conce rts; . . .

Itis indisputable that G

ehl does not qualify for e

xempt status under these statutory provis ions a s it is neither a Maj or Group No. 86 organization nor the agent of such an orga

nization.-9- Such exemptio ns are strictly construe d against the taxp ayer. Tibbals Flooring v. Huddle

ston , 891 S.W.2d 196, 198 (Tenn. 1994).

As demonstrated in the authorities cited above, summary judgmen t in favor of the Commissioner

on the issue of agency

was prop er . While it is true that courts may look beyond the four corners of agreements with third parties to determine

the supposed agency stat us of the taxpayer, Boyd supra ; in the case atbar, such investiga

tion only proves to

reinforce the impression established by the contracts in question . Gehl was not an agent, but rather a purchase

r of good will and sponsorship.

III. Tickets as Donations The last issue Gehl raises on appeal questions the nature of the actual ticketsales. Gehl of c

ourse contends that a

t least a portion of th

ese tic k et purchases represent pu

re do nation. Without discu ssing the portion of tic kets
u sed, the fact remains that individuals in Cla rksville, Memphis a

nd N ashvill e have given money and received in exc hange 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 ti me are slight; in truth, ever y person successfully

solicited for a tic

ket has pur chased a right, and that purchase is taxable under Tennes see Code Annotated se ction 67-6-212(a) (2). 67-6-212 . Amusem ent tax. -- (a) There is lev ied a tax at a rate eq ual to the rate of tax le vied on the sale of ta

ngible persona l propertyat retail by the prov isions o f § 67-6-202 of the gross receipts or gross pr

oceeds of each sale

at retail of the f

ollowing:

. . . (2) Sales of

tickets, fees or other char ges made for admiss

ion to or voluntary contributions made to places o f a musement, sports, entert ainme nt, exhibition, display or other recreation

al events or activities, including free or complimentary a dmissions when made in connection with a va

luable contribution to a

ny organiz ation o r establishment

holding or sponsoring suc h act ivities which shall have the value equivalent to th e charge that would

have otherwise been made; Tenn. Code Ann. § 67-6-212 (1998).
IV. Disposition The order of the chanc

ellor grantin g summary judgment in f avor of the-10-

commissioneris affirmedin all respects. The cause is remanded to the trial court for proceedings pursu ant to Tennessee Code Annotate d section 67-1-1803(d) and such further act ion as may be necessary.Costs of the appeal a re taxed against Gehl Corporation.

_____________________ _____ _____ _ WILLIAM B. CAIN, JUDGE

CONCUR:

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

__________________________________ __ HENRY F. TODD, JUDGE