S.8166 (Thomas) / A.10321 (Rosenthal)


Vice President


S.8166 (Thomas) / A.10321 (Rosenthal)


Sales Tax Extended to Digital Advertising



The Business Council opposes this legislation that would extend the state’s sales and use tax to “digital advertising.” The bill clearly violates the federal prohibition of discriminatory taxes on electronic commerce and should not be approved.

Specifically, this bill would extend the state sales and use tax to “the receipts from every sale, except for resale, of digital advertising services,” providing further that “For purposes of this paragraph: (i)’Digital advertising services’ means 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.”

In general terms, the state’s sales and use tax applies to the sale of all tangible property, except those explicitly exempt, but only applies to those sales of services explicitly included statute.

Existing state tax law (§1105(c)(1)) imposes the sales tax on sale of several listed categories of printed material and information but excludes “the services of advertising or other agents,” among others specific types of print services.

As explained in a Department of Taxation and Finance’s Tax Bulletin (ST-10 (TB-ST-10)), “Sales of advertising services are not subject to sales tax. Advertising services consist of consultation and development of advertising campaigns and placement of advertisements with the media.” The Tax Bulletin goes on to explain that the exemption also applies to, “any advertising materials created by an advertising agency that are conveyed to its customer by intangible means (e.g., by digital or other electronic media),” and “any tangible materials used by the advertising agency that are turned over to the customer after use by the agency to furnish the advertising content to the media.”

The fundamental problem with S.8166 / A.10321 is that it is inconsistent with the federal Internet Tax Freedom Act, 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.

Given that non-digital advertising services would remain exempt from the state sales and use tax under the provisions of S.8166 / A.10321, its tax on digital advertising would be a discriminatory tax that is prohibited under the ITFA.

The sponsor’s memo provides no specific tax policy argument for this sales tax extension; rather, the proposal seems driven by the bill’s second component, which dedicates new revenues to a new state program that would provide zero interest refinancing of certain student loans.

However laudable the spending proposals, this legislation is contrary to federal law, and should not move forward.

For these reasons, The Business Council opposes adoption of with S.8166 (Thomas) / A.10321 (Rosenthal).