The ticketing and event-planning company Eventbrite Inc. paid $799,000 to Chicago to remedy four years of liabilities under the city’s amusement tax and has committed to collect and remit taxes on future transactions beginning July 1.
In a separate dispute, the cinema ticketing company Fandango agreed to pay Chicago $70,000 to remedy amusement tax liabilities dating back to 2007.
According to a confidential settlement obtained through a Freedom of Information Act (FOIA) request by Bloomberg Tax, Eventbrite agreed to settle all liabilities stretching back to Jan. 1, 2015, relating to Chicago’s 9 percent amusement tax as it applies to fees charged on top of the price of an event ticket. Eventbrite charges a service fee of between 2 percent and 3.5 percent on top of the ticket price, and a 2.5 percent payment processing fee if the organizer of the event directs it to serve as the payment agent.
The Eventbrite settlement agreement characterized the payment as the outstanding amusement tax and interest for service fees on tickets sold for Chicago events during the last four years.
Eventbrite agreed in the settlement to collect and remit in the future the amusement tax on the full price of a ticket as well as the applicable service fees and processing fees. The company also agreed to submit a comprehensive annual report summarizing all details of its ticket sales for events in Chicago.
The settlement specifies confidentiality. Certain agreements involving units of government, however, are subject to disclosure under the Freedom of Information Act.
Tax on Streaming Services
The Eventbrite settlement is just the latest development under Chicago’s “Netflix tax” on streaming entertainment services. Under Amusement Tax Ruling No. 5, Chicago created a revenue program in 2015 that imposes the city’s amusement tax on entertainment providers such as: Apple and Spotify in the music-streaming sphere; Netflix, Hulu, and Amazon Instant Video for television and movies; and, Sony Corp., Microsoft and Nintendo Co. for gaming.
Chicago’s tax, thought to be the first of its kind in the nation by a large municipality, has triggered considerable litigation. The libertarian legal advocacy group the Liberty Justice Center filed a constitutional challenge in Cook County Circuit Court shortly after the tax launched on behalf of customers of Netflix, Hulu and Spotify. The advocacy center lost on Chicago’s motion to dismiss in a ruling issued by the court in May 2018. The case has been kicked to the Illinois Appellate Court.
Tech giant Apple has filed a similar challenge, but the case is on hold pending a decision by the appeals court in the Liberty Justice Center’s case.
After fighting with city revenue officials for months, Sony began collecting the amusement tax last November on receipts from customers with a billing address in Chicago.
Tax on Service Fees
Representatives of San Francisco-based Eventbrite didn’t respond to Bloomberg Tax’s request for comment on the settlement. The company, however, tells consumers it collects all applicable sales, amusement, and gross receipts taxes charged by state and local units of government, as well as taxes on service and payment processing fees.
“In certain jurisdictions, Eventbrite is required to facilitate the collection of Tax on our Eventbrite Service Fees and/or our Eventbrite Payment Processing Fees (collectively, “Eventbrite Fees”),” the company states on its online platform. “Tax rates and rules vary by state, county, and locality. Where required, Eventbrite will calculate, collect and remit the Tax to the Tax Authorities.”
In a second settlement provided to Bloomberg Tax, Fandango agreed to pay $70,000 to resolve amusement tax liabilities identified in an audit covering the period between 2007 and 2014. The settlement acknowledges the amount represents a “compromise of disputed claims,” and cannot be construed as “an admission of any tax liability by the taxpayer.”
Fandango permits consumers to purchase movie tickets from its electronic platform. The ticketing company is a unit of NBCUniversal, which holds a majority interest, and Warner Bros. Entertainment, which has a minority interest in Fandango.