The ongoing case between StubHub and the City of Chicago, over whether the online ticket marketplace should pay the city’s 8 percent amusement tax,...

The ongoing case between StubHub and the City of Chicago, over whether the online ticket marketplace should pay the city’s 8 percent amusement tax, took a turn in favor of the city this week when an appeals court asked the Illinois Supreme Court to step in.

In a decision handed down by the 7th Circuit Court of Appeals yesterday, September 29, the judges argued that a key defense StubHub used, that the company was protected under a portion of the Communications Decency Act (CDA) does not apply. Under Section 230 of the CDA internet service providers and users essentially are protected from legal action against them based on the activity of others.

Subsection (c)(1) of the CDA reads, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

“As earlier decisions in this circuit establish, subsection (c)(1) does not create an ‘immunity’ of any kind,” the decision states. “It limits who may be called the publisher of information that appears online. That might matter to liability for defamation, obscenity, or copyright infringement. But Chicago’s amusement tax does not depend on who ‘publishes’ any information or is a ‘speaker’. Section 230(c) is irrelevant.”

Glenn Lehrman, spokesperson for StubHub, told TicketNews that the company had no comment on the case. Ed Walsh, spokesperson for the City of Chicago’s Department of Revenue, did not return a message seeking comment.

The 7th Circuit does not overturn the lower court’s decision that gave StubHub the victory over Chicago, but instead asks the state’s Supreme Court to first rule on various issues that could help it come to a final decision. When the Supreme Court might act is unknown.

“The Supreme Court of Illinois has never addressed any of the three principal questions in dispute between the parties: whether the tax works as an occupation tax, whether the history of the 2005 amendment prevents Chicago from defining Internet auction sites as resellers’ agents, and whether the amusement tax is one on ‘tangible personal property,'” the appeals court states.

Occupation taxes are essentially licensing fees levied in some states on brokers or other professions, and Illinois already has a separate broker registration fee. In 2005, the state amended its ticket resale laws to include “Internet auction listing service” to the definition, and requires that entity to either collect applicable taxes or publish “a written notice on the website after the sale of one or more tickets 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.” StubHub does the latter.

Chicago-based attorney John Moore, who has represented ticket brokers in the past but is not involved in this case, told TicketNews that while the decision is a potential setback for StubHub, there is still a chance that the marketplace can prevail.

“There is a small possibility of good news for StubHub and all brokers, both inside and outside of Illinois,” Moore said. “If the Illinois Supreme Court determines that the answer to either of two of the three sub-parts of the certified question is yes, then the amusement tax is invalid as to all brokers – including those within Chicago. So the ticket industry should keep its collective fingers crossed and hope that the Illinois Supreme Court determines that the Chicago Amusement Tax is either an ‘occupation tax’ or a ‘tax on tangible personal property.'”