As the tax world awaits a decision in the Maryland digital advertising tax cases, more state lawmakers are proposing their own iterations. Several states have focused on social media specifically, functioning as a per-user “data extraction” tax. While others mirror the Maryland approach but with refinements that may make the new tax regime less susceptible to taxpayer challenges.

Law 360: Neb. Social Media Tax Plan Faces Pushback From Biz Groups

Nebraska’s proposed tax on social media companies based on how many customers they have in the state would lead to protracted legal challenges and would hurt the state and the companies themselves, business groups and others told lawmakers Wednesday.

Groups including the Council on State Taxation, which represents multistate businesses, told the Nebraska Legislature’s Revenue Committee that the excise tax proposed in L.D. 1025 would hamper the state administratively and financially.

Tax Analysts: Illinois Budget Proposes Social Media Fee, Pauses Data Center Break

Illinois’s recently introduced budget proposal would impose a fee on social media companies that collect user data, while pausing a tax credit program for data centers.

To generate approximately $200 million in estimated revenue for fiscal 2027, Pritzker’s budget plan proposes a “social media platform fee” on social media companies that “collect consumer data and sell to third-party buyers.” Revenue from the fee would be directed to the general funds to support K–12 education, according to the budget plan.

The fee would be based on the number of monthly active Illinois users whose data the platforms collect and would be levied at the following rates:

• 10 cents per active user, per month, if the company has 100,000 to 500,000 users;
• $40,000 plus 25 cents per user, per month, if the company has 500,001 to 1 million active users; and
• $165,000 plus 50 cents per user, per month, if the company has more than 1 million users.

Chicago recently adopted a similar tax on social media companies, levied at a rate of 50 cents per active user on platforms with more than 100,000 users. The tax took effect January 1.

Tax Analysts: Chicago’s New Social Media Amusement Tax: A Novel Local Levy 

Chicago has enacted a first-of-its-kind social media amusement tax (SMAT), effective January 1, marking a significant and controversial expansion of municipal taxing authority into the digital economy. 

Additional Commentary:

• Andrew Appleby (Tennessee), Data Extraction Taxes, 79 Tax Law. ___ (2026)
• Young Ran (Christine) Kim (Cardozo) & Darien Shanske (UC-Davis), State Digital Services Taxes: A Good and Permissible Idea (Despite What You Might Have Heard), 98 Notre Dame L. Rev. 741 (2022)
• Andrew Appleby, Subnational Digital Services Taxation, 81 Md. L. Rev. 1 (2021)
• Walter Hellerstein (Georgia) & Andrew D. Appleby, The Internet Tax Freedom Act at 25, 107 Tax Notes State 7 (2023)