Ticket brokers are again in the crosshairs of the City of Chicago in an ongoing feud over internet-based brokerages allegedly not paying sales tax on resold event tickets. The issue has percolated for the past few years, but the city has filed a lawsuit against StubHub, and its parent company eBay, for failing to collect the 8 percent amusement tax on resold tickets to concerts and sporting events within Chicago.
The lawsuit, which was filed in Cook County Circuit Court, could have far-reaching effects on the secondary ticket industry if StubHub loses because it could mean any broker that resells tickets to Chicago events might be liable for the tax revenue. In addition, a Chicago victory could embolden other municipalities to add similar laws to their books.
Besides Chicago, a couple of states have considered adding similar amusement taxes to ticket sales, most notably Pennsylvania and Minnesota, but nothing came of those proposals.
Ed Walsh, spokesperson for the Chicago Department of Revenue, told TicketNews that the department did not know how much the two companies might owe in amusement taxes, and referenced a statement from the city’s legal department, which said in part, “The City alleges that both of the defendants have facilitated the sale of thousands of tickets for amusements taking place in the City without collecting the amusement tax. Because the defendants have not registered with the Department of Revenue or produced their books and records to the Department, it is unclear at this point exactly how much money may be owed to the City. For that reason, the City is also asking the court to order a full accounting of each defendants’ ticket sales.”
“The City has attempted to resolve the issue with both defendants, but they have taken the position that the collection responsibilities of the Amusement Tax Ordinance cannot lawfully be applied to their businesses,” the statement added.
When asked whether each subsequent reseller of a ticket would be required to pay the tax, Walsh said yes. “The ordinance requires that each reseller collect tax on the amount by which he/she has marked up the price,” he said.
According to the Chicago Sun-Times, the city is hoping to generate at least an estimated $16 million officials believe it loses annually in unpaid amusement taxes. Some Chicago officials believe StubHub alone could be on the hook for almost $2 million in tax revenue.
Sean Pate, spokesperson for StubHub, told TicketNews in a statement that the company was preparing to fight the lawsuit. “EBay and StubHub have historically enjoyed an excellent working relationship with local tax authorities across the nation, and we intend to continue building those relationships. However, in this case, we do not believe that the city’s Amusement Tax applies to either eBay’s or StubHub’s business models nor do we believe that the Amusement Tax can properly be assessed here. We do intend to fight this litigation vigorously.”
The Chicago ordinance reads in part: “It shall be the joint and several duty of every owner, manager or operator of an amusement or of a place where an amusement is being held, and of every reseller of tickets to an amusement, and of every reseller’s agent, to secure from each patron the tax imposed by Section 4-156-020 of this article and to remit the tax to the department of revenue not later than the last day of each calendar month for all admission fees or other charges received during the immediately preceding calendar month; provided, however, that a reseller of tickets, and a reseller’s agent, shall be required to collect and remit tax to the department only on that portion of the ticket price that exceeds the amount that the reseller paid for the tickets.”
Chicago officials believe StubHub and eBay are reseller agents, therefore the city believes they owe the tax. The city has tangled with other internet-based brokers in the past concerning the same issue, among them Ticket Solutions of Kansas, which is owned by former National Association of Ticket Brokers president Russ Lindmark.