Connecticut is the latest state to take aim at the big pockets of Big Tech with a proposed digital ad tax, and it is not sitting well with advertisers.
The Association of National Advertisers has come out strongly against SB 821, a bill that would levy a 10% tax on digital ad services in the state on any business with annual gross revenues (worldwide) of more than $10 billion.
That would mean on those serving powerhouse platforms including Amazon, Facebook and Google.
“Advertising is a key driver of the economy, representing 17.5% of Connecticut’s economic output. This proposed digital ad tax would undoubtedly be passed on to consumers and Connecticut’s small businesses," said ANA Group EVP Dan Jaffe. "Placing a burden on the effort to sell, as businesses struggle to cope with the impact of the COVID-19 pandemic, is simply a bad idea."
In prepared testimony to the Connecticut legislature's Finance, Revenue and Bonding Committee, ANA said that the tax was a "very serious" threat to commercial advertising in the U.S. Connecticut would be the second state to pass a bill targeting digital advertising. The first was Maryland earlier this year, whose legislature reversed its Republican governor's veto of the bill.
Google and other computer companies have filed a complaint in district court against the Maryland tax, saying it is unlawful.
As with the Maryland tax, the opponents of the Connecticut tax said it is unlawful because it applies to digital but not non-digital advertising, and so is discriminatory and in violation of the Permanent Internet Tax Freedom Act.
In addition, said ANA, "while we understand the importance of securing more funding for the State, the adoption of an arbitrary threshold of global annual gross revenues would tend to tax larger global advertising service providers at a higher tax rate than their domestic counterparts. This would be constitutionally suspect under the Dormant Commerce Clause of the U.S. Constitution."
ANA also said the law raises First Amendment issues because it singles out digital commercial speech for a "punitive tax."
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