June 17, 2008
Chicago Sues eBay, Seeks Amusement Tax Revenue
On May 19, Chicago filed suit in Cook County Circuit Court against eBay, seeking to force the Internet auction website to collect the city's amusement tax on tickets resold using the site. City of Chicago v. eBay, Inc., 2008L050524.
Normally, the city only has the power to require companies physically present in Chicago to collect taxes (companies with property or employees in the city). To get around this obstacle, the City came up with a list of reasons why eBay has "sufficient nexus" with Chicago to make them a tax collector:
- eBay offers a training session ("eBay University"), taught by certified instructors at no single location. There are 30 such instructors in Illinois, but they are not eBay employees. So if a "certified instructor" moves to Tanzania without eBay's knowledge and trains people how to use eBay, does eBay then have to collect taxes for the Tanzanian government?
- eBay "is able to facilitate the sale of tickets" to events held in Chicago. I'm not sure what it even means that a company is able to facilitate a sale. Of course, the city is trying to escape the fact that eBay neither buys nor sells tickets to or from anyone.
- Defendant routinely places "cookies" on the computers of its customers, including those who reside in the City. So eBay (and anyone with a website) should be liable for taxes everywhere, essentially.
Chicago's claims prove too much: if eBay has nexus with Chicago, it's hard to see what website wouldn't. If amusement taxes aren't being collected on tickets, Chicago should go after the people selling the tickets, not a Delaware company that neither buys nor sells tickets, nor has property or employees in Illinois.
Disclosure: I own 14 shares of eBay stock.
