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Constitutional Issues

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As part of the growing trend of states seeking to tax digital activities and data, New York is considering yet another data tax proposal that would tax the collection of personal data for commercial purposes. This latest proposal—which is contained in Senate Bill 4959—would impose a new excise tax “on the collection of consumer data of individual New York consumers by commercial data collectors.” The tax would apply regardless of how the data is collected, whether by electronic or other means. Under the proposal, “consumer data” is “any information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked with a consumer, whether directly submitted to the commercial data collector by the consumer or derived from other sources,” and a “consumer” includes individuals who purchase goods or services from a commercial data collector and individuals who use the services of a commercial data collector, whether charged for those services or not. A “commercial data collector” is a “for-profit entity that: (i) collects, maintains, uses, processes, sells or shares consumer data in support of its business activities; and (ii) collects consumer data, other than consumer contact information, on more than one million individual New York consumers in a month within the calendar year.” The bill would add the tax to a new section 186-h, within Article 9 of the New York Tax Law.

Last March, the Maryland General Assembly passed House Bill 732, which imposed a new “gross revenues tax” on digital advertising services. Governor Larry Hogan vetoed the bill in May. Earlier today, the Maryland State Senate completed the General Assembly’s override of the Governor’s veto, making the Maryland digital advertising tax the first of its kind in the United States. House Bill 732 adds a new tax (imposed in a new Title 7.5) to the Tax…

State legislators have already proposed a number of digital and data tax bills in 2021, some of which are new proposals while others reintroduce proposals from previous legislative sessions.  The proposed bills fall into one of three categories: taxes on digital advertising services, taxes (or fees) targeting social media providers, and taxes on the sale or monetization of personal data.  Most of the proposals are in the early stages, but a Maryland bill originally introduced last year is moving closer to a legislative vote on whether to override the governor’s veto.

In a January 25, 2021 Order, the Supreme Court of the United States invited the Acting Solicitor General to file a brief in New Hampshire v. Massachusetts (concerning the dispute between the two states regarding Massachusetts’ COVID-19 personal income tax sourcing regulation) to “express[ ] the views of the United States” in the matter. New Hampshire commenced the lawsuit last year, asking the Supreme Court to exercise its original jurisdiction to enjoin Massachusetts from enforcing…