Amusement Tax Applied to Ticket Resale

The City of Chicago amusement tax applies to most large sporting events, theater, and musical
performances in the City. The tax is applied at a rate of 9.0 percent or 5.0 percent depending on the type
of amusement. The tax rate is applied to the full ticket price on the initial ticket sale. Additionally, prior to
the 2017 budget, licensed ticket brokers were required to pay the 5.0 percent or 9.0 percent amusement
tax on the ticket mark-up only on any subsequent sale, resulting in complex calculations for ticket re-
sellers and auditors.

As part of the 2017 budget process, the City simplified the amusement tax rate on ticket resale to apply a
flat 3.5 percent on the full resale price, regardless of the mark-up. The change passed as part of the 2017
budget was intended to be revenue neutral and provide for less complex calculations for the licensed
ticket brokers and auditors.

Proposed Ordinance Amendment:

Based on additional feedback from the industry following passage of the 2017 budget, the Department of
Finance and the Law Department drafted an amendment to the amusement tax applied to license ticket
brokers.

The current amendment before the Committee on Finance is to change the rate to a flat 3.0 percent for
tickets charged the 9.0 percent rate on the initial sale and 2.0 percent for tickets charged the 5.0 percent
rate on the initial sale. The 3.0 percent and 2.0 percent will be applied to the full resale price of the ticket
regardless of the markup. It also adds a "sale-for-resale" exemption, so that the tax applies only when the
ticket is sold to a consumer not when one licensed ticket broker sells to another licensed ticket broker.

The current proposed change maintains the revenue neutrality that was discussed upon passage of the
current ordinance in November 2016.

Licensed Ticket Brokers:

These are businesses licensed to buy and sell tickets at the resale level. This means that they buy and sell
tickets after the tickets have initially been sold at face value by the venues.

StubHub does not buy and sell tickets, and this change does not apply them. StubHub is a website on
which third parties buy and sell tickets. In 2012, the Illinois Supreme Court ruled that the City cannot
make StubHub collect the amusement tax. Because of this, licensed ticket brokers are the only businesses
paying tax on ticket resales. This has created an unlevel playing field for these local businesses many of
which are small businesses and because the City cannot require StubHub to collect the amusement tax,
we continue to be deprived of a substantial amount of revenue each year.

Amusement Tax Revenue:

The City estimates it collected approximately $163 million in amusement tax revenue in 2016. Of the
total amusement tax revenue collected in 2016, approximately $1.2 million or .78 percent of the total tax
revenue came from licensed ticket brokers and their customers. A total of 21 licensed ticket brokers paid
the amusement tax in 2016.

The average total amusement tax revenue collected from licensed ticket brokers over the last five years is
less than $900,000.