StubHub Can’t Beat Tax Collection Obligation Using 47 USC 230–Chicago v. StubHub

September 30, 2010 · by · in Derivative Liability

By Eric Goldman

City of Chicago, Ill. v. StubHub!, Inc., 2010 WL 3768072 (7th Cir. Sept. 29, 2010)

In my recent post about Milgram v. Orbitz, I wrote that “online tickets have become a major subfield of cyberlaw” and collected some of our blog posts on the topic. This is yet another case over online ticket sales, this time involving StubHub and reaching the 7th Circuit. I am amazed at how StubHub seems to be a bottomless well of litigation. What a litigation generation machine they’ve been.

This case involves Chicago’s attempt to force StubHub to collect a ticket resale tax on its behalf. StubHub responded that if Chicago wants the tax revenue, it should take the matter up with StubHub’s buyers and sellers. Apparently Chicago didn’t like that answer, so it amended its laws to make it more explicit that StubHub should qualify as “reseller’s agent” who must collect the Chicago tax on ticket resales.

StubHub responded that 47 USC 230 preempted this tax collection obligation. Judge Easterbrook does not respond well to this argument, although it does give him an excuse to reiterate his idiosyncratic view of 230 as articulated in Doe v. GTE and amplified in CLC v. Craigslist:

As earlier decisions in this circuit establish, subsection (c)(1) does not create an “immunity” of any kind….It 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.

From my perspective, StubHub’s 230 argument was a stretch, so I’m not surprised it failed. However, Easterbrook’s reason for deeming it unsuccessful (230(c)(1) isn’t an immunity) is quirky.

The court is kinder to another StubHub defense that Illinois’ state tax obligations preempt Chicago’s tax obligations. The panel certifies that issue to the Illinois Supreme Court for a ruling.