Advertised Value of Trading Stamps Is Basis for State Sales Tax–Red Head Premium Co. v. Schneider

Taxpayer, a trading stamp company, indicated in its catalog the number of stamps necessary to acquire various items of merchandise, and advertised in the catalog and on the face of each stamp that when exchanged for these items each stamp had a value of one cent. Consumers could, however, exchange the stamps for cash rather than merchandise at the rate of one mill per stamp. In addition, consumers not holding sufficient stamps to acquire a particular item of merchandise could make up the difference in cash by paying approximately two thirds of the advertised stamp value. Customers dealing strictly on a cash basis could obtain merchandise for two thirds of the advertised value. Pursuant to section 5739.0l(H) of the Ohio Revised Code, which bases the sales tax on “the aggregate value in money of anything … delivered … in the complete performance of a retail sale,” the Tax Commissioner determined that, for the purpose of taxing merchandise-for-stamp transactions, the “aggregate value in money” of the stamps was their advertised value. This determination was approved by the Ohio Board of Tax Appeals. On appeal to the Supreme Court of Ohio, held, affirmed, two justices dissenting. The sales tax to which a trading stamp company is subject is based on the advertised value of stamps exchanged for merchandise.