(CN) – Ticket brokers are challenging Cleveland’s 8 percent tax on sales of event tickets at higher than face value, claiming a city law unfairly targets the secondary ticket market.
Denver Ticket Co. and Cleveland-based Amazing Tickets Inc. sued the city of Cleveland on Tuesday in the Cuyahoga Court of Common Pleas, alleging a violation of their due-process and equal-protection rights. Dedrick Stephens, commissioner of Cleveland’s Division of Assessments and Licenses, is also named as a defendant.
The brokers say they buy event tickets and make a profit by selling them at higher than face value. They sued to challenge the constitutionality of the city’s admission tax.
“The admission tax is incorporated into or ‘built-in’ to the ticket price,” the lawsuit states. “The hosting facility passes the admission tax on to the purchasers of the ticket in the ‘face value’ of the admission ticket.”
Noting that they are not event sponsors or “persons charging admission,” the brokers claim the city revised its admission tax law in 2009 to go after them.
“The city unlawfully targeted ticket brokers (and the secondary ticket market) and created an ‘excise tax’ on such transactions. Specifically the city has unlawfully mandated 8 percent of the amount paid in excess of the established ‘face value’ of the ticket be paid as an ‘admission tax,’” the complaint states.
The companies added that Cleveland did not enforce the tax against them until 2011, when Amazing Tickets received an administrative subpoena.
In the subpoena, the city demanded the names, addresses, phone numbers and email addresses of the buying and selling parties, according to the lawsuit. Denver Tickets says it received a similar subpoena in 2015.
“The defendants have not enforced [the law] against the Cleveland Browns, Cleveland Cavaliers, Cleveland Indians, and/or their secondary ticket markets,” the complaint states.
The brokers asked the court for a declaratory judgment finding that the city violated their due-process and equal-protection rights with its “double tax.” They also assert a claim for tortuous interference and seek an injunction against enforcement of the tax.
Attorney L. Bryan Carr of Mayfield Heights, Ohio, is representing the ticket brokers.
A spokesperson for Cleveland declined to comment on the pending litigation.