States Look to Tax Social Media

A nightmare may be coming to life for social media companies in Minnesota.

There, Democrats in the state Legislature have embraced a pioneering bill, SB 3197, which seeks to levy the nation’s first tax on social media apps.

The bill would require social media companies to pay the state a monthly fee, depending on the number of Minnesotans who use their platforms.

A platform with 100,000 or fewer Minnesota users would pay nothing. A site with 100,001 to 500,000 would pay 10 cents per user per month. Platforms with 500,001 to 1 million would owe $40,000 a month plus 25 cents for every Minnesota user over 500,000.

Platforms with more than 1 million users would pay $165,000 per month plus 50 cents for every Minnesota user over 1 million.

All told, the bill would raise an estimated $137 million for the Gopher State in fiscal year 2026-27 from the 14 largest social media platforms operating there.

“I don’t think it’s at all unreasonable to ask social media companies to foot their share of the bill, the same way that I don’t think it’s unreasonable to ask Big Tobacco to pay a tax on their products so that we can deal with the public health consequences of smoking,” said Rep. Zack Stephenson (D) in a recent hearing.

New Tactic for Addressing Harms of Social Media

The bill represents a backlash against social media companies, which have suffered a string of negative headlines for years, accusing them of harming children’s mental health while designing products that are intentionally addictive.

Until now, however, governments had looked to address these and other issues through tighter regulations. SB 3197 constitutes a sea change, with state lawmakers looking to treat social media companies as the peddlers of products that have such negative social impacts that they need to be mitigated.

“Every day your behavior is being exploited. Your personhood is being the source of profit. No longer simply your labor. To the extent that we have five-year-olds and children who are objects of profit of some of these companies,” said Aric Putnam (D), one of SB 3197’s authors in a hearing.

“This is not about a future economy. It’s a bill that we should have dealt with five years ago. For at least that long, you made more money owning an algorithm than you did owning a factory. And we have not accommodated or adjusted to the world in which we actually live right now,” Putnam said.

Divided Minnesota House Could Stall Bill

Labor supports the proposal. Eric Harris Bernstein, the policy director of We Make Minnesota, a coalition of labor and community groups, authored an opinion piece in the Minnesota Reformer praising SB 3197. It was headlined, “Social media companies are like tobacco companies; tax their products for their harms.”

Still, as Bernstein himself notes, “With an evenly split House, any tax increase [in Minnesota] will face a difficult path to becoming law.” Meanwhile, NetChoice, a trade group whose members include online businesses like Google, Meta, Yahoo! and TikTok, are aggressively lobbying against the proposal.

Before Minnesota’s Senate Taxes Committee, Amy Bos, director of state and federal affairs for NetChoice, testified that the bill “raises First Amendment concerns because it targets certain media companies for disfavored tax treatment based on the size of their readership. The Supreme Court has previously struck down taxes that burden speech services as unconstitutional under the First Amendment.”

NetChoice concludes that SB 3197 is a “punitive tax” that “threatens Minnesota’s digital economy and conflicts with federal law.”

Both sides appear to be digging in for what could be a raucous, protracted fight. But Minnesota isn’t the only place social media companies are having to fight off tax proposals.

Social Media Tax

At least 10 bills dealing with the taxation of social media platforms have been introduced in five states this year. The measures would impose excise taxes or levies on advertising or gross revenues, with the proceeds going toward providing funding for mental health care.

Other States Looking at Social Media Taxes Too

A search of the LexisNexis® State Net® legislative tracking system turned up bills proposing social media taxes pending in at least three other states:

• California’s AB 796, which would tax social media advertisements, with the revenues going towards a Social Media Safety Trust Fund within the State Treasury.

• Hawaii’s HB 1458, which would direct the state’s Department of Taxation to apply its state corporate income tax to advertising revenue received by major social media platforms, but only if the revenue comes from content created within the Aloha State or from audiences there.

• Washington’s SB 5799 and its companion measure HB 2038, which would impose a business and occupation additional tax on social media operations, which would be used to fund a youth behavioral health account.

A measure was also introduced this year in Maryland (HB 414) that would have imposed a digital social media gross revenues tax but it failed.

Still, it seems the idea of taxing social media companies is becoming more accepted. Indeed, Massachusetts Institute of Technology professors Daron Acemoglu and Simon Johnson wrote in Network Law Review last year that there’s an “urgent need” to tax social media advertising.

“Banning social media would not work in any political system,” they wrote. “But in the US and other industrial democracies, the policy consensus allows imposing excise taxes (“sin taxes”) on goods and services that are bad for our health or on corporate actions that are considered deleterious to the economy.”

They go on to say: “Thus, the best way forward is to impose a flat tax on digital advertising revenue, set at a high rate above some low threshold of revenues. This tax should be paid on digital ad revenues, not income (or profits) because it is too easy for these multinational companies to hide profits in low-tax offshore jurisdictions. Obvious targets for this tax include media and tech behemoths like Google/YouTube (Alphabet), Facebook (Meta), Amazon, Snapchat (Snap), ByteDance (TikTok), and Twitter (now X). But smaller media organizations, including news outlets such as the New York Times, should also be discouraged from manipulating readers.”

The backers of the social media tax proposals in Minnesota and elsewhere seem to share that view. Time will tell if lawmakers in other states decide to move in the same direction.

—By SNCJ Correspondent BRIAN JOSEPH

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