New York: Proposed Bill Would Tax Digital Ads

On March 13, 2020, legislation (Senate Bill 8056) was introduced in the New York Senate that would impose a tax on revenues from digital advertising. This proposal is very similar to a measure under consideration in the Maryland General Assembly. Specifically, effective for tax years beginning on or after January 1, 2021, the tax would be imposed on annual gross revenues derived from digital advertising services in New York.  Digital advertising services is defined as “advertisement services on a digital interface,” with any type of software, website, or application being considered as a digital interface.  The definition, however, is limited to advertisement services that use personal information about the individuals to whom the advertisements are being served. Digital advertising revenues would be sourced to New York based on an apportionment factor that is based on annual gross revenues derived from digital advertising in New York over the taxpayer’s annual gross revenues derived from digital advertising in the United States. The bill directs the Comptroller to adopt regulations to determine the amount of revenue derived from each state in which digital advertising services are provided. The tax would apply to companies that have (a) global annual gross revenues of $100 million or more and (b) digital advertising revenues sourced to New York of $1 million or more.  Using a four-tiered rate regime based on global revenue, the tax rate would range from 2.5 percent up to 10 percent for taxpayers with greater than $15 billion in global annual revenue. Every company expecting to be subject to the tax would be required to make quarterly estimated tax payments.  Please stay tuned to TWIST for updates on this bill.