Andrew D. Appleby (Tennessee), Data Extraction Taxes, 79 Tax Law. ___ (2026):

This Article provides a practical framework for states to tax data extraction by adapting severance tax principles that have underpinned the taxation of natural resource extraction for decades. 

Established tax regimes may not adequately capture the value businesses derive from extracting and monetizing user data. As data-the “new gold”-becomes central to all facets of the economy and increases dramatically in value, particularly with the emergence of AI, states are desperately seeking ways to more effectively tax data-centric business models. States have attempted to modernize corporate taxation regimes, and states have enacted new digital advertising tax regimes. This Article, however, suggests that if states seek a separate tax regime to capture the value businesses derive from data monetization, a data extraction tax is the preferred option. 

This Article first analyzes the conceptual and practical difficulties of taxing data as an economic resource. This Article then explores established state severance tax models for natural resources such as precious metals, minerals, oil, and gas, identifying key principles and mechanisms that can be adapted to data extraction. 

Building on these severance tax principles, this Article proposes a comprehensive design for a state-level data extraction tax, addressing critical elements including the appropriate tax base, rate structures, sourcing rules, and collection mechanisms. This analysis further examines potential constitutional limitations on state taxation of data and considers potential federal preemption challenges that might constrain state taxing authority in this domain. 

By offering a detailed blueprint for state-level data taxation grounded in established legal principles, this Article provides policymakers with a practical framework to address business models based on extracting and monetizing user data.