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The city of Chicago is suing eBay and subsidiary StubHub for failing to collect an 8 percent amusement tax on tickets sold online.

The city charges in the lawsuit filed in Cook County Circuit Court that the two companies are "reseller's agents" and are required under Chicago's law to pay an amusement tax. The suit asks for a court order that will allow the city to audit the companies and hand out fines for not collecting and paying the tax.

eBay and StubHub plan to challenge the suit. "We do not believe that the City's Amusement Tax applies to either eBay's or StubHub's business models nor do we believe that the Amusement Tax can properly be assessed here," said a statement by a spokesperson for both companies. "We intend to fight this litigation vigorously."

The lawsuit alleges that thousand of tickets have been sold to events at Chicago venues via the two Web sites. Total ticket sales sold through eBay and StubHub are not known, which is why the city wants to audit the two companies, said Jenny Hoyle, a spokeswoman for the city's Law Department.

The amusement tax ordinance says that a resellers agent is "a person who, for consideration, resells a ticket on behalf of the ticket's owner or assists the owner in re-selling the ticket." The term applies, "whether the ticket is re-sold by bidding, consignment or otherwise, and whether the ticket is re-sold in person, at a site on the Internet or otherwise," the ordinance states.
 

Earlier this month online retailer Amazon.com sued the state of New York challenging a new sate law that requires out of state Internet retailers to collect sales tax. The state of Texas is also looking into making Amazon collect taxes since it has a physical presence in the state.