Illinois' Social Media Tax
It's a tax based on "number of users/customers" a site has.
6/12/20262 min read
A $56 billion state spending plan is likely to be signed by Illinois Gov., JB Pritzker, after approval by the Democratic-controlled legislature. The biggest source of new revenue is a new “per-user tax” on large social media companies - estimated to bring in another $200 million per year. It's similar to owning a coffee shop and being taxed for the number of people who walk through the door, whether they buy or not.
This tax already has a major issue that has not been addressed. It is unclear what exactly is being taxed since the language in the bill does not directly answer that question.
As passed, the budget plan imposes a tax on social media companies based on "the average number of monthly users of the platform located in the State of Illinois." Does that mean Illinois users… or Illinois-based platforms? As worded, it would mean the latter though I’m sure the former was intended.
Just what is a user? Is it a person, an account? If it’s an account, what happens if a user has multiple accounts? I have three Facebook pages. Does that count as one or three users? What about free accounts with no listed user, such as miscellaneous YouTube watchers? Do Facebook and Instagram count as one social media company… or two, since both are owned by Meta?
The budget plan allegedly seeks to tax "Illinois users", but doesn’t define how that’s classified. Does that include someone from out-of-state who happens to access their social media while in-state? Does that include an Illinois resident accessing their account while out-of-state?
Let us not forget the use of anonymous IP addresses and VPN usage. How can Illinois even be sure where someone is… or isn’t?
It doesn’t clearly define “social media platform”. It simply says "a website or internet medium that…permits a person to become a registered user, establish an account, or create a profile for the purpose of allowing users to create, share, and view user-generated content through that account or profile." That wouldn’t just include Facebook, but could also include Yelp, LinkedIn, Trivago, or my own website should I set up pages with those features. It might even include your email server.
This is complete insanity. It may also be illegal.
The federal Permanent Internet Tax Freedom Act prohibits discriminatory taxes on e-commerce. Passed in 2014, and as explained at the time, it permanently bans states from taxing Internet access or placing multiple or discriminatory taxes on e-commerce. If such a tax ends up affecting those across state lines, it would be subject to the federal Commerce Clause that regulates interstate commerce.
It’s obvious most politicians don’t truly understand how the internet works, yet they want to tax it without clear definitions. Sadly, those same politicians don’t understand much of what goes on in the real world. They’re locked in their Big Boys and Big Girls Clubs, living life up while most of the rest of us struggle. Companies shouldn’t be taxed for having customers, be it coffee shop or social media site. Enough already!
Source used: Reason magazine
