Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 08 C 3284-Wayne R. Andersen, Judge.
The opinion of the court was delivered by: Easterbrook, Chief Judge.
Before EASTERBROOK, Chief Judge, and BAUER and KANNE, Circuit Judges.
The resale of tickets to sports, concerts, and other events usually is illegal in Illinois, if the tickets fetch more than the original price. 720 ILCS 375/1.5(a). Resale at a premium is called scalping, and rules that forbid it even when the events' promoters are content to allow resale have puzzled economists. See Craig A. Depken, II, Another look at anti-scalping laws: Theory and evidence, 130 Public Choice 55 (2006); Pascal Courty, Some Economics of Ticket Resale, 17 J. Econ. Perspectives 85 (Spring 2003); Stephen K. Happel & Marianne M. Jennings, Assessing the Economic Rationale and Legal Remedies for Ticket Scalping, 16 J. Legislation 1 (1989); Sherwin Rosen & Andrew M. Rosenfield, Ticket Pricing, 40 J.L. & Econ. 351 (1997). Cf. United States v. Mount, 966 F.2d 262 (7th Cir. 1992) (discussing one potential justification for restrictions on reselling tickets).
In 1991 Illinois authorized ticket brokers to resell tickets at premium prices, 720 ILCS 375/1.5(b), if they registered with the Illinois Secretary of State and collected all local taxes-for municipalities in Illinois tax the selling price of tickets, see 65 ILCS 5/11-42-5, and want to collect additional taxes on the difference between the original selling price and any higher resale price. Since 1995 the City of Chicago has taken advantage of this opportunity to tax the incremental price of resold tickets. Chicago Municipal Code §4--156--020. The tax is 9% of the original price, and a further 9% of any profit on a ticket's resale.
Illinois amended its scalping laws again in 2005, adding a new subsection (c) to the Ticket Sale and Resale Act. 720 ILCS 375/1.5(c). This amendment allows an "Internet auction listing service" to resell tickets, but it attaches several conditions. One is that the auction service register with both the Secretary of State and the Department of Financial and Professional Regulation. Another is that the auction service either collect and remit all required taxes or publish "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 law enforcement or other government tax officials relating to a criminal investigation or alleged illegal activity". 720 ILCS 375/1.5(c)(6)(B).
StubHub!, which operates an Internet auction site, has registered with the appropriate officials and permits its clients to resell tickets to events in Illinois. It collects commissions from both the seller (15% of the resale price) and the buyer (10% of the resale price) but does not collect taxes. Instead it provides each reseller and buyer with the notice required by §1.5(c)(6)(B) and stands ready to furnish taxing jurisdictions with the information specified by that subsection. Chicago does not think that it would be worthwhile to pursue thousands of persons for a few dollars apiece; instead it wants StubHub! and similar services to collect and remit the taxes. (Even when the stakes are larger, tracking down retail transactions and ensuring payment can be difficult. See Hemi Group, LLC v. New York City, 130 S.Ct. 983 (2010).) Chicago's ordinances have long provided that sales agents must collect and remit its amusement taxes; a recent amendment to §4--156--010 of the Municipal Code says that a "reseller's agent" means "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 . . . and applies whether the ticket is resold by bidding, consignment or otherwise, and whether the ticket is resold in person, at a site on the Internet or otherwise."
Because StubHub! has taken the position that Illinois law permits it to disregard municipal taxes, Chicago filed this suit in state court seeking a judgment that StubHub! is responsible for the amusement tax. StubHub! removed the proceeding to federal court under the diversity jurisdiction. 28 U.S.C. §1332(a). A district judge dismissed Chicago's complaint under Fed. R. 12(b)(6). 622 F. Supp. 2d 699 (N.D. Ill. 2009). It held that, whether or not the City has the authority to levy a tax on resales and designate StubHub! as a "reseller's agent," the tax is preempted by the Preemption Act, 65 ILCS 5/8--11--6a, which prohibits home-rule municipalities from using their authority to tax the "sale or purchase of tangible or personal property" based on a percentage of the sales price. An intermediate court in Illinois has stated that tickets are "tangible personal property," see Mr. B's, Inc. v. Chicago, 302 Ill. App. 3d 930, 935, 706 N.E.2d 1001, 1005--06 (1998), and the district judge thought this dispositive. When sitting in diversity, a federal court should follow the decision of an intermediate state appellate court "unless it is convinced by other persuasive data that the highest court of the state would decide otherwise." West v. AT&T, 311 U.S. 223, 237 (1940). The district judge did not think that any decision by the Supreme Court of Illinois implies a contrary understanding of "tangible personal property."
The parties' briefs on appeal discuss at length whether Chicago has the authority to tax the resale of tickets by Internet auction services-and, if it does, whether that authority is superseded by either the 2005 amendment to the Ticket Sale and Resale Act or by the Preemption Act. For reasons that we discuss later, we think it appropriate to ask the Supreme Court of Illinois to decide whether Chicago may require StubHub! to collect and remit the tax. Certification of a state-law issue is appropriate, however, only if that issue is dispositive. StubHub! contends that federal law blocks Chicago from imposing a tax on Internet auction sites, so we address that possibility first.
StubHub! relies on two federal statutes: §230(e) of the Communications Decency Act, 47 U.S.C. §230(c), and the Internet Tax Freedom Act, 47 U.S.C. §151 note. Section 230's title, "Protection for private blocking and screening of offensive material", does not suggest that it limits taxes that have nothing to do with the content of any speech (the City's tax is the same whether the theater is performing "South Pacific" or "Hair"). Subsection (c)'s caption, "Protection for 'Good Samaritan' blocking and screening of offensive material" bodes even less well for StubHub!. But it nonetheless insists that the statutory text establishes a tax immunity. Subsection (c) provides:
(1) No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.
(2) No provider or user of an interactive computer service shall be held liable on account of-
(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or
(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to ...