PublishedMay 13, 2021

CCIA Cautions Connecticut On Potential Legal Issues Related To Proposed Tax Bills

Washington – Lawmakers in Connecticut are considering a series of bills that would impose a discriminatory new tax on digital advertising services. 

This session, legislators in both houses have introduced five separate bills that would levy taxes on revenue earned through digital advertising. Legislators are framing tax hikes as a roadmap to economic recovery, though bills would disproportionately impact small businesses seeking to connect with customers at a time when they’re still recovering from the pandemic. 

The Computer & Communications Industry Association opposes these bills, which raise legal concerns and would place a punitive financial burden on digital advertisers. CCIA has already filed suit over a similar bill in Maryland, which may violate the Internet Tax Freedom Act and other federal law. 

The following can be attributed to CCIA President Matt Schruers: 

“Like Maryland’s attempt to saddle digital advertisers with discriminatory tax burdens, these bills pose a serious threat to interstate commerce. Digital advertising is one of the most effective ways for small businesses to reach new customers and targeting digital channels with punitive taxes will punish small businesses and raise costs for their online customers.”

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Additional Background:

HB 6187 and SB 821 would establish a flat ten percent tax on gross revenues derived from digital ad services in the state for any business with a worldwide gross revenue exceeding $10 billion. SB 1106 and HB 6443 would impose a similar, though profressive tax on companies’ annual gross revenues from digital advertising services. HB 5645 would specifically tax “social media provider” companies based on annual gross revenue derived from ads in the state, but does not specify a tax rate.  

The Connecticut Office of Legislative Research cautions that HB 6443 may violate the Internet Tax Freedom Act. House Republicans have voiced opposition to the bill and House Republican Minority Leader Representative Candelora has requested Attorney General Tong to assess the constitutionality of the bill as it relates to provisions surrounding budget-making authority. 

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