S.8056-A (Gianaris) / A.10706 (Walker)


Vice President


S.8056-A (Gianaris) / A.10706 (Walker)


Gross Receipts Tax on Digital Advertising



This bill would adopt a new Article 15 of the Tax Law to impose a tax on any person or entity’s “gross revenues derive[d] from digital advertising services in the state.” 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, that use personal information about the people the ads are being served to,” and defines “digital interface" as any type of software, including a website, part of a website, or application, that a user is able to access.

The Business Council opposes this legislation for several reasons.

First and foremost, this bill is inconsistent with the federal Internet Tax Freedom Act (ITFA), P.L. 105-277. The ITFA, first enacted in 1998 and made permanent by provisions of the Trade Facilitation and Trade Enforcement Act of 2015” prohibits state and local governments from imposing discriminatory taxes on electronic commerce, i.e., it prohibits taxes on a good, service, or information delivered electronically that would differ from the tax or rate applied to the same, or similar, good, service, or information if it were purchased through traditional commerce. Its prohibition on discriminatory taxes applies to taxes on the income derived from such goods, services and information. Since this bill imposes an additional, separate tax on income earned from the sales of a digital service, that is not similarly applied to other similar categories of advertising services, it would constitute a discriminatory tax that is prohibited under the ITFA.

Second, the bill layers a second tax on business income already taxed by the state. Such income would be subject to a tax under the state’s corporate franchise or personal franchise tax, depending on the way in which the taxpayer was organized. The additional tax would be either 2.5, 5 or 10 percent, based on the taxpayer’s level of global annual gross revenues. The bill would result in the highest marginal personal income and business income tax rates of any state in the United States.

Third, the bill would create a wholly new tax mechanism. It would require taxpayers to make revenue and tax calculations required by no other jurisdiction in the United States, and it would also require the state Tax Department to create a new and unique reporting, audit and compliance program. In both cases, this bill would result is significant new implementation costs on both taxpayers and the Tax Department.

Finally, the bill would impose a tax on gross receipts, rather than net profits. Gross receipt taxes are considered one of the most economically damaging forms of taxation, as they fail to take into account business expenses, and would be applied regardless of whether the taxpayer earned a profit in the given tax year.

For these reasons, The Business Council strongly opposes adoption of S.8056-A (Gianaris) / A.10706 (Walker).