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Tax Law

New York Rings in the New Year by Proposing Bill that Would Expand Sales Tax Base to Digital Advertising Services

Legislation (S.302) was prefiled in the New York State Senate for the 2021-2022 legislative session that would expand the sales tax base to digital advertising services. The bill was prefiled by Democratic State Senator Kevin Thomas.

The bill defines “digital advertising services” as “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services which markets or promotes a particular good, service, or political candidate or message.”

Senator Thomas introduced identical legislation (S.8166) during the 2019-2020 legislative session, which did not make it out of committee. New York also considered other approaches to taxing digital advertising services last year, including a stand-alone gross receipts tax (S. 8056).

In addition to New York, other states previously considered – and will consider – legislation that would impose taxes on digital advertising services, although under different approaches. For example, Nebraska and the District of Columbia attempted to expand their sales tax bases to “digital advertisements” and “advertising services,” respectively, during their 2020 legislative sessions. And, like New York, legislators in other states will consider taxing digital advertising services in the 2021 legislative sessions. Most notably, the Maryland General Assembly will consider a veto override of H.B. 732, and Washington will consider expanding its sales tax base to digital advertising services through newly introduced legislation (see Bill Draft H-0028).

If passed, the tax revenue from S.302 would be paid into a special fund for providing zero interest refinancing of eligible undergraduate education loans by the higher education services corporation. The act would sunset after 5 years.

The New York Legislature will convene its 2021-2022 legislative session on January 6th. The Eversheds Sutherland SALT Team will continue to follow S.302 during the upcoming legislative session.