Opinion
No. 107522
05-02-2019
AMAZING TICKETS, INC., et al., Plaintiffs-Appellants, v. CITY OF CLEVELAND, et al., Defendants-Appellees.
Argie, D'Amico & Vitantonio, Dominic J. Vitantonio, Mayfield Village, for appellants. Barbara A. Langhenry, City of Cleveland Director of Law; Craig J. Morice and Carl E. Meyer, Assistant Directors of Law, and L. Bryan Carr, for appellees.
Argie, D'Amico & Vitantonio, Dominic J. Vitantonio, Mayfield Village, for appellants.
Barbara A. Langhenry, City of Cleveland Director of Law; Craig J. Morice and Carl E. Meyer, Assistant Directors of Law, and L. Bryan Carr, for appellees.
JOURNAL ENTRY AND OPINION
SEAN C. GALLAGHER, J.:
{¶1} Plaintiff-appellant Amazing Tickets, Inc. ("Amazing Tickets"), appeals from a declaratory judgment rendered by the trial court in favor of defendants-appellees city of Cleveland ("the City") and Dedrick Stephens, the commissioner of the City's division of assessments and licenses ("Commissioner Stephens"). In its decision, the trial court ruled upon the cross-motions for summary judgment filed by the parties and declared that (1) "[Cleveland Codified Ordinances ("CCO") ] 195 is constitutional as applied to [Amazing Tickets] and as written"; and (2) "[CCO] 195 is applicable to [Amazing Tickets]." Upon de novo review, we reach the same conclusion as the trial court and affirm.
Background
{¶2} On October 17, 2017, Amazing Tickets filed an amended complaint for declaratory judgment against appellees seeking a declaration that CCO 195 is unconstitutional both as applied and as written, and that CCO 195 is not applicable to Amazing Tickets. CCO Chapter 195 is an "admission tax" law that imposes a tax upon "every person who pays an admission charge to any one place" within the city of Cleveland. CCO 195.02. A "place" is defined to include, but is not limited to, "indoor and outdoor theaters, dance halls, amphitheaters, auditoriums, stadiums, athletic pavilions and fields, baseball and athletic parks, circuses, side shows, swimming pools, outdoor amusement parks and observation towers and all other similar places." CCO 195.01(g).
{¶3} CCO 195.02 sets forth the tax levied and provides in relevant part:
[T]here is hereby levied and imposed upon every person who pays an admission charge to any one place:
(a) A tax of eight percent (8%) on the amounts paid for admission to any place, including admission by season ticket or subscription. The tax shall apply to every admission within the City for which a charge is made, notwithstanding that the sale of the ticket or other evidence of right of admission thereto is made outside of the City;
(b) A tax of eight percent (8%) on the excess of the amounts paid for tickets or cards of admission to theaters, operas and other places of amusement, sold at newsstands, hotel and places other than the ticket offices of such theaters, operas or other places of amusement, over and above the amounts representing the established price therefore at such ticket offices, such tax to be returned and paid in the manner provided in Section 195.04 by the person selling the ticket[.]
{¶4} CCO 195.04 requires the recipient of any payment on which the admission tax is levied to "collect the amount of tax imposed by Section 195.02 from the person making the admission payment" and remit the tax to the Commissioner of the City's Division of Assessments and Licenses ("the Commissioner"). The Commissioner is charged with enforcement of the provisions of CCO Chapter 195 and has the authority to conduct investigations, compel the production of records, and make assessments of tax. CCO 195.04-05, 195.12, 195.28, 195.29.
{¶5} Commissioner Stephens testified in his deposition that a seller of a ticket in the secondary market who receives in excess of face value is essentially a trustee and is to pay a percentage of the tax to the City. In conducting investigations, Commissioner Stephens performs Google searches on the internet to obtain information on ticket sales in the secondary market. Commissioner Stephens testified that subpoenas are issued to get further information on which to make a tax assessment.
{¶6} Amazing Tickets is a ticket broker that is in the business of purchasing and reselling tickets to sporting and entertainment events, sometimes above face value. Amazing Tickets is headquartered in Mayfield Village, Ohio, and conducts all business through the internet and over the phone. {¶7} Amazing Tickets filed this declaratory-judgment action after Commissioner Stephens sought to enforce CCO Chapter 195 against Amazing Tickets. After cross-motions for summary judgment were filed, the trial court ruled in favor of the City and Commissioner Stephens and against Amazing Tickets. In its judgment entry, the trial court declared that "[CCO] 195 is constitutional as applied to [Amazing Tickets] and as written"; and "[CCO] 195 is applicable to [Amazing Tickets]." Amazing Tickets timely filed this appeal.
Law and Analysis
{¶8} An appellate court reviewing a declaratory-judgment matter applies a de novo standard of review to the trial court's determination of legal issues in the case. Arnott v. Arnott , 132 Ohio St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586, ¶ 1. Likewise, when a declaratory judgment action is disposed of by summary judgment, the review of a trial court's resolution of legal issues is de novo. Hastings Mut. Ins. v. Halatek , 174 Ohio App.3d 252, 2007-Ohio-6923, 881 N.E.2d 897, ¶ 29 (7th Dist.). Because the constitutionality of a municipal ordinance presents a question of law, we review the interpretation of the ordinance de novo and without deference to the trial court's decision. Andreyko v. Cincinnati , 153 Ohio App.3d 108, 2003-Ohio-2759, 791 N.E.2d 1025, ¶ 11 (1st Dist.) ; see also In re Application of Black Fork Wind Energy, L.L.C. , 2018-Ohio-5206, 124 N.E.3d 787, ¶ 43.
{¶9} In determining the constitutionality of an ordinance, we are mindful that legislative enactments have a strong presumption of constitutionality. State ex rel. Ohio Congress of Parents & Teachers v. State Bd. of Edn. , 111 Ohio St.3d 568, 2006-Ohio-5512, 857 N.E.2d 1148, ¶ 20 ; Arnold v. Cleveland , 67 Ohio St.3d 35, 38, 616 N.E.2d 163 (1993). The party challenging the validity of the ordinance has the burden of establishing the law is unconstitutional. State v. Shutway , 2d Dist. Champaign No. 2014-CA-10, 2015-Ohio-2433, 2015 WL 3822317, ¶ 31. The standard of proof depends on the type of constitutional challenge being raised. Ohio Renal Assn. v. Kidney Dialysis Patient Protection Amendment Commt. , 154 Ohio St.3d 86, 2018-Ohio-3220, 111 N.E.3d 1139, ¶ 26 ; Wymsylo v. Bartec, Inc. , 132 Ohio St.3d 167, 2012-Ohio-2187, 970 N.E.2d 898, ¶ 20. A facial constitutional challenge requires the challenger to prove beyond a reasonable doubt that no set of circumstances exists under which the act would be valid. Wymsylo at ¶ 21. An as-applied challenge requires the challenger to prove by clear and convincing evidence that the statute is unconstitutional when applied to an existing set of facts. Simpkins v. Grace Brethren Church of Delaware , 149 Ohio St.3d 307, 2016-Ohio-8118, 75 N.E.3d 122, ¶ 22.
{¶10} Under the first assignment of error, Amazing Tickets argues that the trial court erred in granting summary judgment to appellees and in failing to grant summary judgment in its favor because, according to Amazing Tickets, the City's admission-tax ordinance cannot constitutionally be applied to its business activities and its business activities do not fall within the operative language of the ordinance. Amazing Tickets claims that the "admission tax" is not a true tax on admissions, but instead is a tax on the profits of ticket brokers who operate in the secondary market. Amazing Tickets asserts that the challenge presented is to "an attempt by local (municipal) government to regulate and tax conduct and business activities that are beyond its local jurisdiction[,]" which also "is accomplished in a selective and discriminatory manner."
{¶11} In support of its argument, Amazing Tickets cites earlier cases involving municipal ordinances that imposed an admission tax upon persons paying an admission charge to enter a place within the municipality's jurisdiction. See Smack & Snack, Inc. v. Mayfield Hts. , 107 Ohio App. 141, 149 N.E.2d 253 (8th Dist.1958) ; Bedford Sportspark, Inc. v. Leslie , 155 N.E.2d 730 (Summit C.P.1959). Amazing Tickets also cites Regal Cinemas v. Mayfield Hts. , 137 Ohio App.3d 61, 738 N.E.2d 42 (8th Dist.2000), wherein it was held that admission taxes imposed by certain cities were not unconstitutional as applied to Regal's motion picture patrons. In that case, it was recognized that the taxes "were imposed on Regal's patrons who pay the admission charge to enter [Regal's] facilities." Id. at 72, 738 N.E.2d 42.
{¶12} Amazing Tickets argues that it was never a patron, customer, or attendee to any place within the City's jurisdiction and that the admission tax imposed under CCO 195.02(b) is an arbitrary tax on the business activities of ticket brokers. However, Regal Cinemas and the other cases cited by Amazing Tickets neither involved secondary ticket sales nor addressed the particular issue presented in this matter. While traditionally an admission tax may have been assessed upon patrons paying an admission charge to enter events held at a place within the respective municipality, Amazing Tickets cites no authority to suggest the City cannot validly impose taxes upon the admission charge established upon resale.
{¶13} Amazing Tickets further argues that the practical operation of the plain terms of the taxation structure of CCO 195.02(b) shows that it is an arbitrary tax on the aftermarket business activities of ticket brokers, as opposed to a true tax on admissions to an event. Amazing Tickets also claims that it does not fall within the operative language of the ordinance. We are not persuaded by these arguments.
{¶14} Ohio municipalities are permitted to exercise all powers of local self-government, including the power to tax, as derived from the Home Rule Amendment, Ohio Constitution, Article XVIII, Section 3. Cincinnati Bell Tel. Co. v. Cincinnati , 81 Ohio St.3d 599, 602, 693 N.E.2d 212 (1998). The municipal power to tax may be limited only by a provision of state law that expressly imposes the restriction. Hillenmeyer v. Cleveland Bd. of Rev. , 144 Ohio St.3d 165, 2015-Ohio-1623, 41 N.E.3d 1164, ¶ 23, citing Cincinnati at 605, 693 N.E.2d 212. Amazing Tickets does not dispute the right of Ohio municipalities to levy admission taxes.
{¶15} The plain terms of CCO 195.02 reflect that the City's "admission tax" is a tax on "the amounts paid for admission" to any place. The tax is levied and imposed upon the "person" who pays for admission and is to be collected, reported, and remitted to the Commissioner by the person receiving the tax. CCO 195.04. Under CCO 195.02(b), the admission tax imposed upon the patron includes a tax on any markups charged by ticket brokers on the resale of tickets. Nonetheless, the tax is specifically imposed upon the person purchasing the admission ticket and is associated with the amount paid for admission, notwithstanding the collection duties placed on ticket brokers. The tax is limited to amounts paid for admission to places within the City. As noted in a case cited by the trial court, "Ticket brokers do not pay the tax when one broker sells to another broker. The tax is paid by the patrons and merely collected by sellers or resellers. Thus, the fact that appellants are resellers of tickets rather than sellers is irrelevant. The tax * * * is clearly authorized[.]" Mr. B's, Inc. v. Chicago , 302 Ill.App.3d 930, 938, 706 N.E.2d 1001, 236 Ill.Dec. 127 (1998).
{¶16} Amazing Tickets has not shown by clear and convincing evidence that the statute is unconstitutional when applied to an existing set of facts. The first assignment of error is overruled.
{¶17} Under the second assignment of error, Amazing Tickets argues that the trial court erred in granting summary judgment to appellees and in failing to grant summary judgment in its favor because, according to Amazing Tickets, CCO 195.02(b) has no standards to prevent arbitrary and discriminatory enforcement, and the ordinance was actually administered and enforced in an arbitrary and discriminatory manner. Amazing Tickets raises a void-for-vagueness challenge and argues that in enforcing the admission tax in the secondary market, the City targets businesses with an easily traceable internet presence with a higher volume of transactions, as opposed to any individual.
{¶18} " ‘When a statute is challenged under the due-process doctrine prohibiting vagueness, the court must determine whether the enactment (1) provides sufficient notice of its proscriptions to facilitate compliance by persons of ordinary intelligence and (2) is specific enough to prevent official arbitrariness or discrimination in its enforcement.’ " Columbia Gas Transm. Corp. v. Levin , 117 Ohio St.3d 122, 2008-Ohio-511, 882 N.E.2d 400, ¶ 42, quoting Norwood v. Horney , 110 Ohio St.3d 353, 2006-Ohio-3799, 853 N.E.2d 1115, ¶ 84. Further, "[a] civil statute that does not implicate the First Amendment is unconstitutionally vague only if it is so vague and indefinite that it sets forth no standard or rule or if it is substantially incomprehensible." Columbia Gas at ¶ 46.
{¶19} In this case, the City's admission-tax law provides clear notice of its proscriptions and the conduct required for compliance, and is specific enough to prevent arbitrariness or discrimination in enforcement. The record reflects that the City's admission-tax law is enforced against other entities selling admission tickets in the secondary market. Moreover, Amazing Tickets cannot credibly complain that it cannot be expected to know the various laws of the locality when it was issued subpoenas for the Commissioner to gather information on which to make a tax assessment. As a result, the void-for-vagueness argument is unpersuasive.
{¶20} We also recognize that "Cities and states are free to draw distinctions in how they treat certain citizens. ‘The Equal Protection Clause does not forbid classifications. It simply keeps governmental decisionmakers from treating differently persons who are in all relevant respects alike.’ " Park Corp. v. Brook Park , 102 Ohio St.3d 166, 2004-Ohio-2237, 807 N.E.2d 913, ¶ 19, quoting Nordlinger v. Hahn , 505 U.S. 1, 10, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992). An "especially deferential" standard is applied in the context of structuring internal taxation schemes. Park Corp. at ¶ 23. "Under this standard, tax distinctions need not be drawn perfectly." Hillenmeyer , 144 Ohio St.3d 165, 2015-Ohio-1623, 41 N.E.3d 1164, at ¶ 30.
{¶21} Appellant has not shown that the City's admission-tax law or its enforcement process are unconstitutional. The second assignment of error is overruled.
{¶22} Under the third assignment of error, Amazing Tickets argues that the trial court erred with regard to the legal standard. Amazing Tickets claims that the trial court announced a "beyond a reasonable doubt" standard, but that it has raised an "as applied" challenge that requires the challenger to prove by clear and convincing evidence that the statute is unconstitutional when applied to an existing set of facts. Amazing Tickets argues that a "reasonable relation" test should be applied to the facts and that the admissions tax is an arbitrary tax or fee that the City is seeking to impose on Amazing Tickets. As summed up by appellants, it claims that "[CCO] 195.02(b), as applied to the commercial business activities of internet/telephone ticket brokers like Amazing Tickets, who have no nexus whatsoever to the City, is unconstitutional."
{¶23} As stated herein, our standard of review is de novo and we afford no deference to the trial court's decision. Andreyko , 153 Ohio App.3d 108, 2003-Ohio-2759, 791 N.E.2d 1025, at ¶ 11. The City's admission-tax ordinances are afforded a strong presumption of constitutionality. State ex rel. Ohio Congress of Parents & Teachers , 111 Ohio St.3d 568, 2006-Ohio-5512, 857 N.E.2d 1148, at ¶ 20. Amazing Tickets has not met its burden of establishing beyond a reasonable doubt that CCO Chapter 195 is unconstitutional on its face. Also, it has not established by clear and convincing evidence that CCO Chapter 195 is unconstitutional when applied to an existing set of facts. Accordingly, we overrule the third assignment of error. Judgment affirmed.
MARY EILEEN KILBANE, A.J., and PATRICIA ANN BLACKMON, J., CONCUR