A Windy City Windfall? Amusement Tax Applies to Permanent Seat Licenses for Bears Games, Court Rules

The Chicago Amusement Tax applies to sales and subsequent transfers of permanent (or personal) seat licenses (PSLs) to Chicago Bears football games, the Illinois Appellate Court recently ruled in Stasko et. al. v. City of Chicago.

Setting aside the likelihood for an appeal and a corresponding stay, it just got more expensive to be a Bears season ticket holder. Currently, on the official Chicago Bears PSL marketplace, PSLs range in price from $1,000 to $87,500. As such, tacking on the amount paid for a PSL to an amount already subject to a 9 percent tax can yield a hefty tax bill.

The city of Chicago, on the other hand, has tapped into an untaxed resource resulting in a windfall for its coffers and they have further identified a perpetual source of revenue as PSLs will continue to appreciate in value so long as demand for Bears season tickets continues to remain high.

For practical purposes, the court confirmed, from a tax perspective at least, what most fans already knew: the face value of a ticket is not the actual cost of attending a game. PSLs are not only, as the court puts it, an “additional step,” towards season ticket ownership, but more accurately, they are an “additional fee,” and oftentimes an expensive one. 

Almost half the teams in the National Football League (NFL) sell PSLs. 

The Bears began selling PSLs in 2002 as a means of funding renovations at Soldier Field. Similar to other NFL PSL programs, the Bears require persons wishing to purchase season tickets to home football games to first purchase a PSL. The PSL grants the owner the exclusive privilege of purchasing the season ticket associated with the PSL seat for home football games (it should be noted that not all seats require the purchase of a PSL, although an overwhelming majority do). Once purchased, PSL owners control the season tickets for the corresponding stadium seat. However, if the owner chooses not to purchase the ticket, the PSL terminates automatically and without notice. But once the PSL and, more importantly, the season ticket are purchased, owners are granted the privilege of entering the stadium to view a home game. 

In addition, PSLs are transferrable. Owners often make a substantial profit by subsequently selling their PSL by an aftermarket sale. Accordingly, a lucrative market for PSLs has emerged for some of the more popular and successful NFL teams with some PSLs currently ranging in the tens of thousands of dollars.

PSLs have been controversial since the idea for them was conceived. Some view them as an investment. Others claim that PSLs out-price the average fan from season ticket ownership. However, Stasko has added a new wrinkle to this ongoing controversy and has made the city of Chicago a target for frustration for both sides.

As a home rule municipality, Chicago imposes a 9 percent tax on admission fees and other charges paid for the privilege to enter an amusement. The amount paid for individual and season tickets for Bears home games is already subject to this amusement tax. However, in May 2009, Chicago sent letters to approximately 1,700 PSL owners informing them that they may have tax balances due. The reason for these potential assessments? The city claimed that the amount paid for a PSL is part of the cumulative cost of entering Soldier Field to view the Bears play football and is accordingly subject to the amusement tax.

Specifically, subsequent purchasers of PSLs are the target of the city’s collection efforts. When the Bears began selling PSLs, the organization collected the amusement tax from original PSL purchasers. The city maintains, however, that tax was also due on all subsequent transfers. As one can imagine, there weren’t too many, if any at all, subsequent purchasers that paid a tax that they were unaware of and wasn’t being enforced.

A class action lawsuit followed alleging that the amusement tax was inapplicable to both initial and subsequent PSL transfers. Among their other allegations, the class argued that PSLs are merely a right to purchase tickets, not a right to gain admittance to an amusement, and that PSLs further do not constitute an admission fee within the meaning of the amusement tax. The complaint also alleged that the tax was a violation of state law prohibiting home rule municipalities from imposing a tax on the gross receipts from the use, sale, or purchase of tangible personal property.

On September 30, the court rejected the class’ arguments regarding the practical purpose and function of PSLs.  The court determined that PSLs are part of the total charges which permit the season ticket holder to enter the stadium and to sit in a specific seat. Accordingly, the court ruled that a PSL effectively operates as an “additional step” to obtain the right to purchase Bears season tickets and is therefore a personal privilege that carries no vested property rights. 

The court further applied an “essence of the transaction” test to determine whether the sale or purchase of a PSL involves tangible personal property. The court found that, because the purchase of a PSL is an actual and necessary part of obtaining season tickets and because the PSL becomes void if the corresponding ticket is not purchased, the privilege of viewing a Bears game is the substance of a transaction involving a PSL.

In addition, the court determined that a PSL is inseparable from the privilege of viewing a Bears game because the only intrinsic purpose of purchasing a PSL is to purchase the right to view the game. Accordingly, the court ruled that owning a PSL is a prerequisite to purchasing a ticket for a PSL seat, and therefore “admission fees” and “other charges” paid to view the Bears game from that seat includes both the season ticket price and the PSL fee.

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