Opinion ID: 1614505
Heading Depth: 1
Heading Rank: 1

Heading: promotional items

Text: 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). [1] 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 sec. 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). [2] 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 sec. 77.52(2) (a) 2, Stats., and that sec. 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. [3] The Brewers contend that sec. 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. The Brewers contend that the court of appeals' holding is inconsistent with the department's interpretation of sec. 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 material, display cases, racks and other similar marketing aids to manufacturers, distributors, jobbers, and wholesalers acquiring such property to give the items to retailers for use in selling merchandise to customers. For example, a paint manufacturer is the consumer of color cards which it provides to retailers without charge to facilitate the sale of the manufacturer's paint. A tavern operator is also liable for the tax measured by the purchase price to him of the liquor he gives away to customers as free drinks. Samples furnished to doctors by drug manufacturers are self-consumed by the manufacturer, and the use tax applies to the cost of the ingredients. When merchandise purchased for resale is used for any purpose other than resale, such as giving it away to customers or to a charity, the user becomes liable for the use tax based on the cost of the merchandise to the user. . . . 2. Coupons and Premiums . . . (c) Coupons issued and redeemable by retailers: . . . (3) The retailer may purchase by use of a resale certificate tangible personal property which is to be given as a premium to the retailer's customer when that customer purchases another product which is subject to the sales tax. This type of transaction is deemed a sale of both the premium and the product so the retailer's supplier may accept a resale certificate when selling such merchandise to the retailer. (Emphasis added.) The club asserts that admission to a baseball game is a product and that the instant case falls within paragraph 2(c) (3) of the TIM. However, the purpose of the TIM is not entirely clear. We are still faced with the question of whether the items were given to the game patrons (¶ 1) or whether two taxable items were sold to the fan for one flat price (¶ 2(c) (3)). We can accept the department's contention that ¶ 2(c) (3) of TIM S-52.1 applies to situations such as when an appliance retailer, to attract attention, gives a bicycle to every purchaser of a color television set, rather than reducing the price of the television set. In this situation, the customer is buying both the television set and the bicycle. The bicycle was not given away, but was actually resold, as evidenced by the taxable gross receipts from the sale of the tangible property. In contrast, we believe that the items in the case before us were given away by the Brewers and do not constitute a two-for-one sale. The fact that the promotional items were given only to fans of a certain age who had to use their tickets to gain admission to the game and who did not pay more than the usual admission charge makes the gratuitous nature of the transfer even more apparent. Moreover, the language of sec. 77.51(24) prevents admission to a baseball game from being considered to be a product as that term is used in ¶ 2(c) (3) of TIM S-52.1. The Brewers also contend that the court of appeals' decision is inconsistent with this court's decision in Dept. of Revenue v. Milwaukee Refining Corp., 80 Wis. 2d 44, 257 N.W.2d 855 (1977). In Milwaukee Refining, this court held that the sale of gold by the taxpayer to a dentist, for use in repairing patients' teeth, did not constitute a sale at retail within the meaning of sec. 77.51 (4), Stats., so as to be subject to the sales tax pursuant to sec. 77.52(1), Stats. This court explained that for purposes of determining when a taxable event occurs, the statutory phrase `use or consumption but not for resale as tangible personal property or services' could be understood only as meaning the final and ultimate employment of the property which results in its withdrawal from the marketplace of goods and services. 80 Wis. 2d at 51. We cannot agree with the Brewers that the above-quoted language requires a different result than that reached by the court of appeals. This court in Milwaukee Refining also noted that the use or consumption must be final in the commercial sense that the property will not be resold to another as tangible property or services. Id. This language, we believe, brings us back to the initial question of whether the promotional items and tickets were subsequently resold to the game patrons. As we have previously discussed, the statutory framework of ch. 77 requires our conclusion that the Brewers were the users or consumers of the items and were, therefore, liable for the payment of the use tax. [8]