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New Taxes on the Digital Economy: A Closer Look at the New York Data Tax Proposal

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Over the last year, state and local governments have proposed a variety of novel taxes on the digital economy, including taxes on digital advertising and social media platforms. Two factors have motivated these proposals: (1) closing budget gaps by taxing out-of-state companies and (2) addressing perceived public policy concerns with out-of-state companies profiting on information of in-state residents. The latest in this line of tax proposals has been a New York proposal to impose an excise tax on companies that collect data from New York consumers.

On Feb. 19, 2021, Sen. Liz Krueger, who chairs the Senate Finance Committee, introduced Senate Bill 4959, which would impose an excise tax on commercial data collectors. The tax is intended to be an alternative to digital advertising taxes, which are likely to be struck down as violative of the Permanent Internet Tax Freedom Act.

Unlike digital advertising taxes or sales taxes, the proposed data tax is not a gross receipts tax. Instead, it acts more like a “head tax” — it would be based on the number of New York residents on which the taxpayer collects data. Commercial data collectors that collect data on less than 1 million New York consumers are not subject […]

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