Chicago demands ticket taxes from eBay, StubHub

The City of Chicago is suing eBay and its secondhand ticket outfit StubHub, claiming they've failed to collect millions of dollars a year in city taxes.

On Monday, as reported by The Associated Press, the city filed separate suits against eBay and its subsidiary, demanding records of their Chicago-area ticket sales. A Chicago ordinance requires businesses to collect taxes on the resale of all tickets to "sporting events, cultural events, and other amusements taking place in the city," and the dual-suits allege that the two online outfits refuse to do so.

eBay did not respond to multiple requests for comment. But according to Jennifer Hoyle, a spokeswoman for the Chicago Department of Law, the company has told the city it's immune to the ordinance. It has also refused to provide records of its online ticket sales, she says.

"One of the big issues is that we don't exactly know what we're losing in taxes. The companies involved have not provided the paperwork that would tell us what we're missing out on," Hoyle told us. "They claim that the ordinance isn't applicable to them."

In addition to asking for records, the suits asks for money. Chicago demands that the two online outfits start collecting and remitting its amusement tax - and fork over some back taxes as well.

As Hoyle points out, the Chicago Municipal Code requires all ticket resellers and all ticket reseller agents to collect the city's amusement tax. The agents bit includes websites, but that wasn't added until September 2006, says Donal Quinlan, a spokesperson for the office of Chicago alderman Edward Burke, who was instrumental in revising the ordinance.

Burke's office estimates that Chicago is missing out on $16m a year in taxes just on the resale of tickets over the net. Or at least, that was the estimate back in 2006.

A pre-Internet-era Supreme Court case says that online businesses aren't required to collect sales taxes unless they have a physical presence in the state where the customer resides. StubHub has offices in Chicago and that may mean that eBay has a physical presence in Illinois as well.

Amazon is now battling physical presence issues in both New York and Texas. ®