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The city wanted an amusement tax collected on the difference between a ticket's face value and its higher resale price. StubHub charges sellers a 15 percent commission and buyers a 10 percent commission, but doesn't collect a tax from either.
Chicago amended its municipal code in 2006, adding Internet ticket reselling agents to its definition of ticket brokers, who are required to pay the city a 9 percent tax. StubHub and smaller competitors refused to, and in 2008 Chicago filed suit against StubHub and eBay, which owns it. The suit wound up in federal court because StubHub is based in California, and after a ruling against the city was contested in the Seventh Circuit Court of Appeals, that court asked the Illinois Supreme Court for an interpretation of state law.
The case now returns to the Seventh Circuit for final decision, but the writing is on the wall. If an amusement tax is to be paid, it will have to be paid by the actual resellers—not their reselling agent. "The city has overstepped its home rule authority," said the supreme court.
"I'm surprised at the ruling," said John Moore, an attorney and expert on legal taxation cases. "The question is now, what will the city's reaction be? Because the Illinois legislature can decide to change this. Both the supreme court and the Seventh Circuit have already said so."
Moore observed, "This truly adversely affects brokers in the city, because they are stuck collecting the tax, and StubHub and eBay are not. It will be interesting to see what the mayor's position will be."
Here's the previous Reader story on the suit.