NetChoice Files First Challenge to Chicago's Social Media Tax

"The social media amusement tax applies to any business that gathers data on more than 100,000 Chicago consumers in a calendar year, and is calculated at $0.50 per consumer in excess of 100,000 in a given calendar month."

"In Friday's complaint, NetChoice said Chicago's tax is preempted by the federal Internet Tax Freedom Act, which bars state and local governments from imposing 'discriminatory taxes on electronic commerce,' because it only applies to online social media businesses."

"The tax violates the First Amendment by excluding news, education, and public safety websites based on content, the complaint alleges. Laws that single out the press for special treatment are subject to some degree of heightened scrutiny, NetChoice said."

NetChoice, a tech industry trade association, challenged Chicago's first-in-the-nation social media tax in Illinois Circuit Court. The tax applies to companies gathering data on over 100,000 Chicago consumers, charging $0.50 per consumer monthly above that threshold. NetChoice argues the tax is preempted by federal Internet Tax Freedom Act provisions against discriminatory electronic commerce taxes, violates the First Amendment by excluding news and educational websites based on content, and breaches the commerce clause through double taxation concerns. The outcome could influence whether other jurisdictions adopt similar taxes. NetChoice, representing Meta, Google, and Amazon, has previously challenged state regulations on social media, with mixed results in court.

Read at Bloomberglaw