Chicago May Tax Sales of Licenses for Stadium Seats

Tuesday, October 8th, 2013


The Illinois Court of Appeals recently ruled that Chicago could tax sales of permanent seat licenses for seats in a sports stadium.

Owners of permanent seat licenses for seats in a stadium sought to prevent Chicago from taxing sales of their licenses. These licenses gave their owners the right to purchase season tickets for specific seat locations for Chicago Bears football games in the stadium. The license became void if the season ticket for the seat was not purchased. The owners argued that the sale of the license was the sale of tangible personal property and that Chicago therefore could not tax it. The owners also argued that the licenses were not themselves admission to amusement: they merely gave the owners the right to purchase admission to amusement.

The Illinois Constitution requires that a home rule city (such as Chicago) get authorization from the state legislature before the city can impose a tax upon occupations. Illinois law also prohibits home rule cities from imposing tax on the use, sale, or purchase of tangible personal property. Home rule cities may impose other taxes, including taxes on amusement.

Chicago taxes charges for admissions to amusement. An "amusement" is "any exhibition, performance, presentation, or show for entertainment purposes." It includes athletic contests such as football games.

The court ruled that Chicago could tax the sales of the licenses. A sale of a license was not a sale of tangible personal property. The license granted the owner a right to use property for a specific purpose but did not transfer control or possession of the property. The use of the property (the seat) had no value without the accompanying privilege to see the amusement. The purchaser's main purpose was not to use the seat but to watch the Bears games. Although the owner would have to purchase a season ticket in addition to the license to watch the games, the purpose of purchasing the license was to get the privilege of watching the games at the stadium. The purchase of the license was a purchase made to view a game. This was therefore a purchase of an admission, not of tangible personal property. Illinois law did not prevent Chicago from taxing sales of licenses.

The tax also did not constitute a tax upon occupations. An occupations tax is one designed to impose a tax upon specific occupations. Such a tax is designed to either regulate a specific occupation or tax the privilege of undertaking a specific occupation. A tax upon all amusements was not a tax upon specific occupations. Its purpose is not to regulate an occupation or to tax the privilege of engaging in providing amusement. It was therefore not an "occupations" tax. Chicago could tax the sale of the licenses.

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