eBay prevails in legal fight with Chicago over collection of amusement tax

In a separate but similar action to its lawsuit against eBay subsidiary StubHub, the City of Chicago has again found itself on the wrong end of a legal case involving the collection of its amusement tax on ticket sales.

U.S. District Court Judge Blanche M. Manning last week dismissed a lawsuit against eBay by the city that claimed the auction Web site is a "reseller's agent," which would have made the site liable for collecting the 9 percent (5 percent for many cultural events) amusement tax on resold tickets.

In Manning's ruling, eBay doesn't live up to Chicago's own definition of a reseller's agent, in part because the Illinois state legislature allows for internet resale through auction sites like eBay's and only requires the sites to publish language that, "automatically informs the ticket reseller of the ticket reseller's potential legal obligation to pay any applicable local amusement tax in connection with the reseller's sale of tickets."

Neither eBay nor the city immediately returned messages seeking comment.

Collection of the tax would be a logistical nightmare for eBay due to the vast number of individual ticket brokers and resellers who list and sell tickets on its site.

The city lost a similar lawsuit earlier in the year involving eBay's StubHub division, which local brokers objected to because they are forced to collect the tax which often increases the cost of their tickets and puts them at a disadvantage compared to resellers who don't pay the tax.

In her ruling, Manning said that both eBay and the city agree that the city has the power to levy the amusement tax, but eBay argues that the state legislature's Ticket Sale and Resale Act from 2005 preempts the city's requirement.

The city was arguing that the tax “would apply to the amount paid by a patron for the privilege of viewing an amusement even if no physical ticket were used,” but eBay successfully countered that tickets are "tangible personal property" and therefore must abide by the state law.