Justia.com Opinion Summary: The U.S. Court of Appeals for the Seventh Circuit, considering a suit by the city to collect taxes from a ticket reseller, requested a determination of whether municipalities may require electronic intermediaries to collect and remit amusement taxes on resold tickets. The Illinois Supreme Court held that state law preempts such a tax. The state has a long history of protecting consumers and has regulated auctioneers for more than 10 years and ticket resales for 20 years; it has regulated scalping in some form since 1923. The statutory scheme, and the debates which produced the Ticket Sale and Resale Act (720 ILCS 375/0.01) evince an intent to allow internet auction listing services to opt out of any obligation regarding local tax collection. The city overstepped its home rule authority.
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2011 IL 111127
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 111127)
THE CITY OF CHICAGO, Appellant, v. STUBHUB, INC.,
Appellee.
Opinion filed October 6, 2011.
JUSTICE THEIS delivered the judgment of the court, with
opinion.
Chief Justice Kilbride and Justices Freeman, Thomas, Garman,
Karmeier, and Burke concurred in the judgment and opinion.
OPINION
¶1
This case comes before us on certification from the United States
Court of Appeals for the Seventh Circuit. See Ill. S. Ct. R. 20 (eff.
Aug. 1, 1992). That court asked us to determine “whether
municipalities may require electronic intermediaries to collect and
remit amusement taxes on resold tickets.” Our answer is no.
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BACKGROUND
In 1923, the Illinois General Assembly passed the Ticket Scalping
Act, which prohibited owners of public entertainment venues from
selling admission tickets anywhere other than the venues’ box offices.
See 1923 Ill. Laws 322. In 1935, the legislature broadened that statute
beyond venue owners, and outlawed the sale of such tickets for more
than face value. See 1935 Ill. Laws 707. This statute remained
unchanged until 1991, when the legislature rewrote it to provide an
exception for ticket brokers, who could avoid any penalties for selling
tickets above the box office price by meeting several requirements,
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including registering with the Secretary of State and paying all
applicable state and local taxes. See Ill. Rev. Stat. 1991, ch. 121½,
¶ 157.32. The legislature amended, and expanded upon, these
requirements in 1995. See 720 ILCS 375/1.5 (West 1996).
That year, the City of Chicago also amended its municipal code
to extend its existing amusement tax, which applied to admission fees
for entertainment events in the city, to ticket resales. Under this
amendment, “every reseller” was required to pay the amusement tax
on “that portion of the ticket price that exceeds the amount that the
reseller paid for the tickets.” Chicago City Council, Journal of
Proceedings, November 15, 1995, at 12016.
In 2002, the legislature amended the Auction License Act,
requiring “Internet Auction Listing Services” either located in Illinois
or dealing with persons or property located in Illinois to register with
the state’s Office of Banks and Real Estate. See 225 ILCS 407/1027(b) (West 2010). This amendment brought online auctioneers under
the same regulatory umbrella that covered more traditional
auctioneers, but the amendment also recognized the significant
differences between them. Specifically, the statute defined an internet
auction listing service as a website or other interactive computer
service that brings together prospective sellers and buyers of personal
property, but “does not examine, set the price, or prepare the
description of the personal property ***, or in any way utilize the
services of a natural person as an auctioneer.” 225 ILCS 407/1027(a)(1) (West 2010). The statute mandated that an internet auction
listing service must certify that it “does not act as the agent of users
who sell items on its website, and acts only as a venue for user
transactions,” and that it retains identification information on its users
and provides customer support for its users. 225 ILCS 407/1027(c)(1) (West 2010).
Shortly thereafter, as tickets to entertainment events began to
appear on such websites, the legislature replaced the Ticket Scalping
Act with the Ticket Sale and Resale Act (Act) (720 ILCS 375/0.01 et
seq. (West 2010)). The new statute still prohibited the sale of tickets
for more than face value, but contained more exceptions, including
one for internet auction listing services, which featured extensive and
detailed consumer protection measures. Section 1.5(c) provides:
“This Act does not apply to the sale of tickets of admission to
a sporting event, theater, musical performance, or place of
public entertainment or amusement of any kind for a price in
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excess of the printed box office ticket price by a reseller
engaged in interstate or intrastate commerce on an Internet
auction listing service duly registered with the Department of
Financial and Professional Regulation under the Auction
License Act and with the Office of the Secretary of State on
a registration form provided by that Office. This subsection
(c) applies to both sales through an online bid submission
process and sales at a fixed price on the same website or
interactive computer service as an Internet auction listing
service registered with the Department of Financial and
Professional Regulation.
This subsection (c) applies to resales described in this
subsection only if the operator of the Internet auction listing
service meets the following requirements:
(1) the operator maintains a listing of the names and
addresses of its corporate officers;
(2) the operator is in compliance with all applicable
federal, State, and local laws relating to ticket selling
activities, and the operator’s officers and directors have
not been convicted of a violation of this Act within the
preceding 12 months;
(3) the operator maintains, either itself or through an
affiliate, a toll free number dedicated for consumer
complaints;
(4) the operator provides consumer protections that
include at a minimum:
(A) consumer protection guidelines;
(B) a standard refund policy that guarantees to all
purchasers that it will provide and in fact provides a
full refund of the amount paid by the purchaser
(including, but not limited to, all fees, regardless of
how characterized) if the following occurs:
(i) the ticketed event is cancelled and the
purchaser returns the tickets to the seller or
Internet auction listing service; however,
reasonable delivery fees need not be refunded if
the previously disclosed guarantee specifies that
the fees will not be refunded if the event is
cancelled;
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(ii) the ticket received by the purchaser does
not allow the purchaser to enter the ticketed event
for reasons that may include, without limitation,
that the ticket is counterfeit or that the ticket has
been cancelled by the issuer due to non-payment,
unless the ticket is cancelled due to an act or
omission by such purchaser;
(iii) the ticket fails to conform to its
description on the Internet auction listing service;
or
(iv) the ticket seller willfully fails to send the
ticket or tickets to the purchaser, or the ticket
seller attempted to deliver the ticket or tickets to
the purchaser in the manner required by the
Internet auction listing service and the purchaser
failed to receive the ticket or tickets; and
(C) standards of professional conduct;
(5) the operator has adopted an independent and
disinterested dispute resolution procedure that allows
resellers or purchasers to file complaints against the other
and have those complaints mediated or resolved by a third
party, and requires the resellers or purchasers to submit to
the jurisdiction of the State of Illinois for complaints
involving a ticketed event held in Illinois;
(6) the operator either:
(A) complies with all applicable requirements of
the Retailers’ Occupation Tax Act and collects and
remits all applicable federal, State, and local taxes; or
(B) publishes 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, and discloses to law enforcement or other
government tax officials, without subpoena, the name,
city, state, telephone number, e-mail address, user ID
history, fraud complaints, and bidding and listing
history of any specifically identified reseller or
purchaser upon the receipt of a verified request from
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law enforcement or other government tax officials
relating to a criminal investigation or alleged illegal
activity; and
(7) the operator either:
(A) has established and maintains a consumer
protection rebate fund in Illinois in an amount in
excess of $100,000, which must be cash available for
immediate disbursement for satisfaction of valid
consumer complaints; or
(B) has obtained and maintains in force an errors
and omissions insurance policy that provides at least
$100,000 in coverage and proof that the policy has
been filed with the Department of Financial and
Professional Regulation.” 720 ILCS 375/1.5(c) (West
2010).
StubHub, Inc., registered as an internet auction listing service in
compliance with the Act. StubHub describes itself as “the world’s
largest online ticket marketplace” and operates a website or
“platform” where users can buy and sell tickets to various events
around the country. All users must register by providing personal
information on the website. A user who wants to sell a ticket may list
it on the website by submitting information about the event–the
venue, date, time, and location of the ticket–as well as choosing a
method and period for the sale, through a series of interactive prompts
on the site. A user who wants to buy a ticket may then search for it on
the site by the event, the date, or the venue. A prospective buyer and
a prospective seller can communicate with each other only via the
website. Once they have agreed upon a price, Stubhub processes the
sale, charging the buyer a service fee of 10% of that price, and the
seller a 15% fee. Pursuant to the Act, StubHub informs its sellers of
their tax obligations.
In 2006, the City amended its amusement tax ordinance again to
require not only “resellers,” but also “reseller’s agents” to collect and
remit the amusement tax. Under the ordinance, a reseller’s agent is:
“a person who, for consideration, resells a ticket on behalf of
the ticket’s owner or assists the owner in reselling the ticket.
The term includes but is not limited to an auctioneer, a broker
or a seller of tickets for amusements, as those terms are used
in 65 ILCS 5/11-42-1, and applies whether the ticket is resold
by bidding, consignment or otherwise, and whether the ticket
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is resold in person, at a site on the Internet or otherwise.”
Chicago Municipal Code § 4-156-010 (amended May 24,
2006).
The amendment further provided that ticket resellers and reseller’s
agents have a joint and several duty to collect and remit the tax to the
City. Chicago Municipal Code § 4-156-020(A) (amended May 24,
2006). However, when a licensed ticket broker is not involved in the
sale, the ordinance provides that the reseller’s agent “shall be
primarily responsible for collecting and remitting the tax, and the
reseller shall be responsible for collecting and remitting only if the
reseller’s agent fails to do so.” Chicago Municipal Code § 4-156030(F) (amended May 24, 2006).
In 2007, the City sent a letter to StubHub stating that it might be
deemed a reseller’s agent under the ordinance, and might be required
to collect and remit the amusement tax on behalf of its users. The
letter requested information and documents with respect to StubHub’s
“facilitation” of ticket resales to entertainment events located in
Chicago since January 1, 2000. StubHub declined to provide any of
the information, and in 2008, the City filed a four-count complaint
against StubHub. The City alleged that StubHub was a reseller’s
agent under the ordinance because it “resold and/or facilitated the
resale” of tickets. Accordingly, the City claimed, StubHub had a joint
and several duty to collect and remit the amusement tax on thousands
of ticket resales from 2000 to the present. The City sought a
declaration that StubHub was required to do so; a writ of mandamus
ordering StubHub to produce records and submit to an audit; fines for
StubHub’s violation of the ordinance in refusing to comply with the
City’s request to produce records; and a monetary judgment in the
amount of the tax revenues plus interest and penalties.
StubHub removed the case to federal court on diversity grounds
(see 28 U.S.C. § 1332(a) (2006)), and filed a motion to dismiss. The
federal district court granted that motion. City of Chicago v. StubHub,
Inc., 622 F. Supp. 2d 699, 704 (N.D. Ill. 2009). The federal district
court stated that the City’s power to impose an obligation on StubHub
to collect and remit the amusement tax depended upon the nature of
the tax. Id. at 703. Because our appellate court had decided that ticket
resales were sales of tangible personal property (see Mr. B’s, Inc. v.
City of Chicago, 302 Ill. App. 3d 930, 937 (1998)), and the state
legislature had preempted the City’s authority to tax such property
(see 65 ILCS 5/8-11-6a (West 2010)), the federal district court held
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that the City lacked the authority to require StubHub to collect and
remit the amusement tax incurred by its sellers. StubHub, 622 F.
Supp. 2d at 703-04.
The City appealed. The federal circuit court first examined, then
rejected, StubHub’s argument that federal law prohibited the City
from imposing a tax on internet sites. City of Chicago v. StubHub!,
Inc., 624 F.3d 363, 367 (7th Cir. 2010). The federal circuit court then
discussed Illinois law, noting that in a diversity case a district court
is bound by state appellate court case law, but a circuit court is not:
“We could make a decision, confident that any error would be
corrected by the state judiciary before too much time had
passed. As far as we can tell, however, the state judiciary will
be unable to address this subject unless we certify. There are
only two pending cases, both in federal court.[1] *** Both suits
began in state court and were removed under the diversity
jurisdiction. Any similar suit likewise would be removable.
*** This means that the state judiciary may never have an
opportunity to resolve this dispute. The only way the federal
judiciary can be sure that it is applying authentic state law is
to certify the subject to state court.” Id. at 367-68.
The federal circuit court found no precedent from this court on the
three principal questions in dispute, namely, “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.’ ” Id. at 367. Under Rule 20, the court certified a broader
question: “whether municipalities may require electronic
intermediaries to collect and remit amusement taxes on resold
tickets.” Id. at 368. According to the federal circuit court, it phrased
the question in that way “to ensure maximum flexibility for the state
judiciary, which may elect to address any of the three sub-questions
we have already identified, or may conclude that some other issue
altogether determines the appropriate answer.” Id. We accepted
certification, and allowed the County of Cook to file an amicus
1
The other case is City of Chicago v. eBay Inc., No. 10-1144,
which was argued before the court of appeals in tandem with the StubHub
case, and held in abeyance pending our decision here. See StubHub!, Inc.,
624 F.3d at 367. According to StubHub, eBay is its “corporate parent.”
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curiae brief in support of the City and eBay and Netchoice Coalition
to file an amicus curiae brief on behalf of StubHub.
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ANALYSIS
Initially, we must address the threshold question of whether
StubHub is a “reseller’s agent” under the ordinance. If it is not, the
ordinance does not apply.
StubHub argues it is not a reseller’s agent because it is not an
agent for its users. StubHub notes that in order to obtain a license, it
must certify that it is not its users’ agent. See 225 ILCS 407/1027(c)(1) (West 2010). According to StubHub, this statutory
requirement recognizes that internet auction listing services do not act
as agents, but rather as marketplaces that bring buyers and sellers
together. Further, StubHub asserts that under common law agency
principles, it lacks control over its users. Though it may terminate a
user’s access to its website, it does not dictate the terms of any sales.
The City argues that under the ordinance a reseller’s agent is
simply a person who, for consideration, resells a ticket for the ticket’s
owner or assists the owner in reselling the ticket. According to the
City, StubHub fits this description. It allows ticket owners to list
tickets for sale on its website, and offers them ways to do so that help
potential buyers find the tickets they want. In return for these
services, StubHub collects a fee from both buyers and sellers.
We agree with the City. The City is free to define terms in its
code, and need not track common law agency principles. Under the
ordinance, a reseller’s agent on “a person who, for consideration,
resells a ticket on behalf of the ticket’s owner or assists the owner in
reselling the ticket.” Chicago Municipal Code § 4-156-010 (amended
May 24, 2006). That term applies to StubHub because it provides
services that help users sell their tickets, and it is compensated for
those services. See StubHub, 624 F.3d at 366-67 (“intermediaries that
take an active role in staging an auction and exchanging goods for
money, as StubHub[] does, are resellers’ agents”). We now turn to the
central and dispositive issue in this case: whether the City has the
authority to impose an obligation upon internet auctioneers to collect
and remit its amusement tax. Our discussion begins, and ends, with
home rule.
Under the 1870 Illinois Constitution, the balance of power
between our state and local governments was heavily weighted
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toward the state. Municipalities “were limited to those powers which
were expressly authorized, implied or essential in carrying out the
legislature’s grant of authority.” Kanellos v. County of Cook, 53 Ill.
2d 161, 166 (1972); see ILCS Ann., 1970 Const., art. VII, § 6,
Constitutional Commentary, at 264 (Smith-Hurd 2006). The 1970
Illinois Constitution drastically altered that balance, giving local
governments more autonomy. Schillerstrom Homes, Inc. v. City of
Naperville, 198 Ill. 2d 281, 286-87 (2001); City of Evanston v.
Create, Inc., 85 Ill. 2d 101, 107 (1981) (quoting 4 Record of
Proceedings, Sixth Illinois Constitutional Convention 3024). Section
6(a) of article VII provides:
“Except as limited by this Section, a home rule unit may
exercise any power and perform any function pertaining to its
government and affairs including, but not limited to, the
power to regulate for the protection of the public health,
safety, morals and welfare; to license; to tax; and to incur
debt.” Ill. Const. 1970, art. VII, § 6(a).
This intentionally imprecise language grants “the broadest powers
possible” (Scadron v. City of Des Plaines, 153 Ill. 2d 164, 174
(1992)), but it also contains an inherent limit upon local government
activity. See Ampersand, Inc. v. Finley, 61 Ill. 2d 537, 540 (1975)
(“the most general and uncertain limitation upon home rule power is
found in the language of the home rule grant itself”). The concept of
home rule is based upon a preference for local solutions to local
problems, and consequently the powers of local governments extend
only to matters “pertaining to” their affairs, and not those of the State.
Kalodimos v. Village of Morton Grove, 103 Ill. 2d 483, 501 (1984);
7 Record of Proceedings, Sixth Illinois Constitutional Convention
3056. “If a home rule unit attempts to exercise a power or to perform
a function which is not within the scope of the grant contained in
[]section 6(a)–i.e., if the action does not pertain to the government
and affairs of the home rule unit–*** the exercise or performance
would be void unless authorized by statute or by another provision of
the 1970 Constitution.” ILCS Ann., 1970 Const., art. VII, § 6,
Constitutional Commentary, at 265 (Smith-Hurd 2006). The question
is not whether section 6(a) itself imposes a limitation upon home rule,
but instead how extensive that limitation should be. David C. Baum,
A Tentative Survey of Illinois Home Rule (Part I): Powers and
Limitations, 1972 U. Ill. L.F. 137, 153. The framers acknowledged
that the answer to this question would lie in judicial interpretation of
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this qualifying phrase. 4 Record of Proceedings, Sixth Illinois
Constitutional Convention 3052.
An ordinance pertains to local government and affairs where it
addresses local, rather than state or national, problems. Schillerstrom
Homes, 198 Ill. 2d at 290. When a problem is purely statewide or
purely local in nature, our task is easy. Village of Bolingbrook v.
Citizens Utilities Co. of Illinois, 158 Ill. 2d 133, 138-39 (1994). More
often, however, a problem is a concern for both state and local
governments. County of Cook v. John Sexton Contractors Co., 75 Ill.
2d 494, 508-09 (1979). In those cases, we must resolve the tension
between the value of a uniform regulatory landscape and the value of
a potentially more diverse one. The framers gave two examples of
when state legislation would prevail. A home rule county ordinance
limiting interest rates on mortgages or other loans would be invalid
“because of the extensive federal and state regulation of credit
institutions,” and a home rule city ordinance limiting telephone rates
for local calls would be invalid because of “[l]ong standing state
regulation of utility rates.” 4 Record of Proceedings, Sixth Illinois
Constitutional Convention 3052. See also People ex rel. Lignoul v.
City of Chicago, 67 Ill. 2d 480, 486 (1977) (holding that the “business
of banking” does not pertain to local government and affairs because
it is “pervasively regulated by the State and Federal governments”);
People ex rel. Bernardi v. City of Highland Park, 121 Ill. 2d 1, 14
(1988) (holding that a minimum wage standard does not pertain to
local government and affairs because it has “traditionally been a
matter of State concern, outside the power of local officials to
contradict”).
Thus, the extent and history of the State’s activity in resolving the
problem will determine whether the problem pertains to local
government and affairs. This analysis, however, does not rest on any
specific constitutional formula. Kalodimos, 103 Ill. 2d at 501. Instead,
it is more nuanced, and requires us to consider “the nature and extent
of the problem, the units of government which have the most vital
interest in its solution, and the role traditionally played by local and
statewide authorities in dealing with it.” Id.
First, we must examine the nature and extent of the problem.
Here, the City claims that the problem is one of revenue, and more
specifically revenue sufficient to provide municipal services for
entertainment events. The City imposes its amusement tax on initial
sales of tickets, as well as resales. Presumably, it budgets for
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municipal services based in part upon the number of events and the
number of likely attendees. These considerations remain constant,
regardless of whether tickets are resold at prices above face value.
What the City has attempted in amending its code is not to generate
revenue with a new tax, but to generate revenue through an existing
tax by changing the mechanics of its collection and enlisting StubHub
and other internet auctioneers to gather it from diasporic sources.
StubHub claims that the problem is a broader one of opening new
markets while simultaneously protecting consumers through
regulation of an emerging business model. The General Assembly
saw the matter from StubHub’s perspective, as shown in the
legislative record.
The General Assembly amended the Auction License Act in 2002
to allow the State to regulate internet auctioneers. In the House
debates surrounding this amendment, its sponsor, Representative
Meyer noted that internet auctioneers utilize an entirely different
business model because they do not physically handle the property to
be sold, nor do they handle the proceeds from the sale. 92d Ill. Gen.
Assem., House Proceedings, April 4, 2002, at 171 (statements of
Representative Meyer). Representative Meyer continued, “The
regulatory provisions of the original Auction License Act do not fit
the Internet auction business and would be unduly burdensome to the
Internet auction industry.” Id. The amendment created a separate
regulatory structure for internet auctioneers, but made them
accountable to the Office of Banks and Real Estate, like traditional
auctioneers, in order to guard the people of Illinois against fraud.
The Ticket Sale and Resale Act, adopted three years later, was
consistent in these aims. It created an exception to the criminal
offense of scalping for internet auction listing services, and imposed
upon them many of the same registration and certification
requirements that apply to ticket brokers. The transcripts from the
House Committee on Consumer Protection hearings for House Bill
873, which later became the Act, are replete with references to the
emerging market in internet ticket resales, and the lack of any
regulation of those transactions. In one hearing Representative
Saviano, the bill’s sponsor, stated, “There’s a new way of doing
business, and we’re providing those consumer protections in the new
way of doing business.” House Committee on Consumer Protection,
March 1, 2005, at 11.
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Similar themes emerge from the legislative debates. In the House,
Representative Saviano noted that the bill resulted from six months
of negotiations, in an effort to “get a handle” on, and impose
consumer protection measures upon, internet ticket resales. 94th Ill.
Gen. Assem., House Proceedings, April 15, 2005, at 129 (statements
of Representative Saviano). In the Senate, Senator Harmon also
mentioned that this was a “heavily negotiated bill,” which legalized
a new secondary market for ticket resales. 94th Ill. Gen. Assem.,
Senate Proceedings, May 18, 2005, at 14 (statements of Senator
Harmon). We conclude that the problem, as viewed by the legislature,
was two-fold: opening a new market and protecting consumers.
Second, we must examine whether the State or the municipality
has a greater interest in solving that problem. The City again argues
that it has a vital interest in maximizing revenue, reminding us of the
adage that “taxes are the lifeblood of government” and of every
person’s duty to contribute to municipal services. StubHub argues
that the State has a greater obligation not only to protect consumers,
but also to create uniform standards to govern internet auction listing
services.
The Auction License Act, as we have noted, brought internet
auctioneers under the same regulatory auspices as traditional
auctioneers, even while it acknowledged significant differences
between them. Several years later, after months of negotiations over
the Act, the legislature reached a compromise, which took into
account these differences. The legislature imposed some measure of
order on internet ticket resales by requiring internet auctioneers to
register with the State and make various assurances in the name of
consumer protection, and in exchange allowed them to skirt the ban
on scalping and, more importantly, the tax collection obligation the
Act places on ticket brokers. See 720 ILCS 375/1.5(b)(4) (West
2010).
The Act gave internet auction listing services the choice of
collecting and remitting all federal, state, and local taxes, or notifying
resellers of their own liabilities for any applicable local amusement
taxes and also disclosing any personal information about a reseller
requested by municipal tax officials in relation to a criminal
investigation. 720 ILCS 375/1.5(c)(6) (West 2010). In the House,
Representative Saviano explained,
“[T]he bill states that if a ticket seller, for example, sells
Chicago event tickets on eBay, eBay will automatically
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inform the ticket seller of their obligation to collect and remit
to the City of Chicago’s amusement tax. If the City of
Chicago becomes aware of an eBay user or specific group of
eBay users who are habitually failing to remit and collect the
city’s tax ***, then the Bill gives the city the right to obtain
from eBay that user’s real name, address and transaction
history upon submitting a specific request to eBay. From this
information, the city may pursue whatever legal action it
deems necessary to collect any back taxes or prosecute the
user or users for fraud.” 94th Ill. Gen. Assem., Senate
Proceedings, April 15, 2005, at 130-31 (statements of
Representative Saviano).
Senator Harmon stated that the City was “neutral,” and the only
opposition came from Senators sympathetic to the interests of ticket
brokers. 94th Ill. Gen. Assem., Senate Proceedings, May 18, 2005, at
14-15 (statements of Senator Harmon). Senator Dillard offered a floor
amendment, which he said would “level the playing field” between
ticket brokers and internet auctioneers, and impose the same tax
collection obligations on both groups. Id. at 15 (statements of Senator
Dillard). Senator Harmon responded that the bill regulated millions
of dollars worth of ticket resales, and would ultimately result in
increased tax revenues for the city. Id. at 16 (statements of Senator
Harmon). He later noted, “We are not changing the law with respect
to the amusement tax. The seller still has to remit the amusement tax,
if there is an amusement tax applicable.” 94th Ill. Gen. Assem.,
Senate Proceedings, May 20, 2005, at 65-66 (statements of Senator
Harmon). He then likened internet auction listing services to lessors,
and stated that requiring them to collect and remit the amusement tax
“would be like saying that the landlord of the ticket broker is now
responsible for collecting the amusement tax on behalf of the ticket
broker.” Id. at 66 (statements of Senator Harmon).
StubHub contends that in order to comply with the City’s
ordinance, it would have to alter its business model, fashioning
features on its website through which it could verify at least the face
value of the ticket. However, under its current user agreement, and
consistent with the Auction License Act (see 225 ILCS 407/1027(a)(1) (West 2010)), StubHub does not examine the tickets that its
users list for resale. StubHub also notes that if other municipalities
followed the City’s lead and required internet auctioneers to collect
and remit amusement taxes, there could potentially be a patchwork of
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local regulations. The legislature considered such burdens, and chose
not to impose them, preferring instead a more comprehensive and
uniform approach across the State. We conclude that the State has a
greater interest than any municipality in regulating this emerging
business model and protecting consumers.
Finally, we must examine whether the State or the municipality
has a traditional role in solving the problem. If the problem is
protecting consumers by regulating internet auctioneers, then neither
the State or local governments have a traditional role. The State,
however, has a long history of protecting consumers, dating back to
1961 with the criminalization of deceptive practices (720 ILCS 5/170.5 (West 2010)) and the enactment of the Consumer Fraud and
Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West
2010)). Further, it has regulated auctioneers for more than 10 years,
and ticket resales for 20 years. And it has regulated scalping in some
form since 1923. In fact, the City did not begin to tax ticket resales
until the State allowed ticket brokers to avoid the ban on scalping.
And it did not impose a tax collection obligation on reseller’s agents
until the State created a similar exception for internet auction listing
services. We conclude that the State has traditionally played a greater
role in addressing the problems in this area.
The statutory scheme, and the debates which produced the Act,
evince an intent by the legislature to allow internet auction listing
services to opt out of any obligation regarding local tax collection.
That is a policy decision this court is ill-advised to ignore. The City’s
ordinance–specifically the imposition of a joint and several duty on
internet auction listing services to collect and remit its amusement tax
(Chicago Municipal Code § 4-156-020(A)) and the requirement that
internet auction listing services are primarily responsible for
collecting and remitting this tax (Chicago Municipal Code § 4-156030(F))–does not pertain to its own government and affairs. The City
has overstepped its home rule authority.
CONCLUSION
For the reasons that we have expressed, we conclude that Illinois
municipalities may not require electronic intermediaries to collect and
remit amusement taxes on resold tickets.
Certified question answered.
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