Appeals Court Says Section 230 Does Not Protect Stubhub From Having To Pay 'Amusement Tax' On Tix Sold

from the limitations dept

Thu, Sep 30th 2010 4:24am — Mike Masnick

A couple years ago, we pointed out what appeared to be a pure money grab by the city of Chicago, demanding that Stubhub pay an extra tax (called an "amusement fee") on sales made by sellers and buyers in that city. As we noted, the original ticket buyer already paid a tax, and resellers themselves should be responsible for paying any additional tax. The district court dismissed the complaint from the city, noting that Section 230 protected it from being liable for actions of users.

However, the appeals court does not agree. While it did not issue a complete ruling -- instead asking the Illinois state supreme court to weigh in on the subject first -- it does (very, very quickly) dismiss the Section 230 safe harbor claim (and instead focuses on other possible defenses). The key part on Section 230:

[Section 230] 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.

Leaving aside the fact that Section 230 specifically exempts intellectual property law (making it odd to suggest it matters for copyright infringement), this seems like a pretty narrow view of Section 230. The point of Section 230 is to make sure any liability is properly placed on the parties taking action. Saying that it is limited solely to "speaking," ignores the overall point of Section 230. Instead, the court seems to suggest it's entirely reasonable to put third party liability on a company -- especially in cases like Stubhub where it has a specific purpose (such as selling tickets, rather than as a general classifieds site). This seems like an unfortunate and unnecessary limitation on Section 230.

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Filed Under: amusement tax, chicago, section 230
Companies: stubhub

14 Comments

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inc (profile), 30 Sep 2010 @ 5:11am

"As we noted, the original ticket buyer already paid a tax, and resellers themselves should be responsible for paying any additional tax."

s/should/should not/ ?

I am wondering if there are any laws to limit this kind of double taxation, but the sense of entitlement from everyone these days probably not. So many from top to bottom want a cut of money they had no hand in helping to create.
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The Mighty Buzzard (profile), 30 Sep 2010 @ 5:15am

That's an odd read
I'd like to know why Section 230 was even brought up. It's obviously not applicable to this case. Chicago wasn't trying to hold them responsible for their members not paying taxes, they were trying to claim Stubhub owed taxes on transactions they were facilitators of but not party to. The original district court judge was plainly on the crack for citing Section 230 rather than simply stating that Stubhub neither bought nor sold tickets and so was not liable to pay a tax for doing so.
So, yeah, the safe harbor based decision should have been thrown out as moronic, as should've Chicago's suit.
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abc gum, 30 Sep 2010 @ 5:26am

Amusing Amusement Tax is amusing
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Anonymous Coward, 30 Sep 2010 @ 5:38am

if im not mistaken stubhub acts like a broker, all it does is put buyers and sellers in contacts so they can trade.

do brokers in USA (or Illinois) pay sales tax (i know they are calling it amusement tax, but its really a sales tax), they probably don't. so why should a business doing that online have dif. standards.
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Anonymous Coward, 30 Sep 2010 @ 6:33am

Could people sue Apple for letting apps send GPS and other private information stealthy to others?

Researchers find phone apps sending data without notification
http://www.physorg.com/news204978481.html
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Anonymous Coward, 30 Sep 2010 @ 7:09am

It just came to mind something else.

All those insurance polices for third party liability are going up because people lost respect and confidence on the system. Companies all over are doing a piss poor job on the PR front and will be hammered by the public, how much that is costing everybody?
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Anonymous Coward, 30 Sep 2010 @ 7:22am

Ticket broker sales in most states are subject to sales or amusement tax on the purchase price. Stubhub is an Ebay company and charges sellers a 15% commission to act as the broker and handle the tranaction processing. As such they would be responsible for collecting any applicable taxes. If Stubhub had a storefront in Chicago they would likely be required to collect the taxes whether the purchase was in person or via mail. Arguable issue is whether a Chicago buyer should have tax liability to Chicago if neither the seller nor the event is in Chicago; i.e. where did the virtual sale take place.
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Anonymous Coward, 30 Sep 2010 @ 9:07am

Re:
thx for clarification, and in that case i agree with the courts
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Anonymous Coward, 30 Sep 2010 @ 9:12am

Re: Re:
no wait.

who is supposed to pay the tax the seller/ reseller or the broker?
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Brad Hubbard (profile), 30 Sep 2010 @ 9:31am

Stubhub is not just a listing service
Stubhub is not just a listing service. Most of their listings (some 80-90%) come directly from the ticket brokers, and are never actually bought or sold by the public.

Stubhub then takes an additional 15% commssion from the "seller" and 10% from the "buyer". In this way they are acting as an original seller, in many cases tickets that have never hit the public before and are sold, for the first and only time, on Stubhub.

Is Chicago's amusement tax a dumb tax? Probably, but the vast majority of the tickets sold through Stubhub in Chicago should fall into it, because they're not being "resold", but marketed and sold for the first time.

Read more about Stubhub's business model here:
http://dontcostnothing.wordpress.com/2007/03/09/stubhub-the-biggest-fraud-in-the-ticket-busin ess/
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Anonymous Coward, 30 Sep 2010 @ 10:01am

Re: That's an odd read
Yup. Seems like the right decision to me (on Section 230).
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Anonymous Coward, 30 Sep 2010 @ 10:29am

The "Automated" Defense
So, if I create an automated device or process that does bad things, should I not then be responsible for what it does?

So, for example, that I rig up a shotgun with a tripwire on my property to keep "bad guys" out. If it then winds up killing neighborhood children who get on my lawn, should I then be able to just say "Hey, it's not my fault. It's an automated device! There's no way I can make it actually know who's a bad guy and who isn't!" Or should I be held responsible anyway on the grounds that I shouldn't have implemented in that case? Oh, but that might discourage my "innovation"!

So, should "automation" be a defense, as Mike contends, or not?
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Anonymous Coward, 30 Sep 2010 @ 10:31am

Re: The "Automated" Defense
Oops, wrong thread. Meant to be in the one about the French Court decision.

Reposting it there.
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Anonymous Coward, 30 Sep 2010 @ 2:27pm

Re: Re: Re:
A tax based on a sale is usually paid by the buyer. The real question is whether Stubhub is or can be made responsibile for collecting the tax and remitting to Chicago.
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