This proposal—to impose sales tax on digital advertising—straddles the categories of subnational data taxes and gross-revenue digital services taxes. At present, Maryland, Utah, and Washington have sales taxes that expressly reach the sale of these advertising services. A report from the Institute for Taxation and Economic Policy, below the fold.

Nick Johnson, Taxing Advertising Would Modernize State Sales Tax Bases for the Information Age, Inst. for Tax’n & Econ. Pol’y (May 7, 2026):

The long-standing exemption in most states of advertising from state sales taxes was always a questionable policy choice, and the rise of data-driven, algorithmically targeted advertising has made it indefensible, partly because of its significant social costs. States that extend their sales taxes to advertising and/or enact an excise tax — whether broadly or with a focus on targeted or programmatic advertising —stand to raise billions in revenue while correcting a structural bias in their tax codes that implicitly subsidizes some of the most profitable corporations in human history. . . . Policymakers who act thoughtfully—attending to questions of tax design, distributional fairness, and legal compliance—can help bring state tax systems into alignment with the realities of a twenty-first century information economy . . . .