On May 1, 2024, California Senator Steve Glazer, Chair of the Senate Revenue and Taxation Committee, unveiled another proposal to tax digital advertising. This time, Senator Glazer proposes to amend California Senate Bill 1327 to impose a 7.25% tax on “data extraction transactions in the state.”[1] This “data extraction transactions tax” (referred to as the “DETT”) would feel like a root canal as it would suffer from the same legal infirmities as Maryland’s controversial Digital Advertising Gross Receipts Tax.

So, what’s a data extraction?

“Data extraction transactions” means a transaction where a person:

  1. “sells user information or access to users to advertisers,” and
  2. “engages in a barter by providing services to a user in full or partial exchange for the ability to display advertisements to the user or collect data about the user.”

We know this is a re-branded digital advertising tax because the DETT proposal provides that digital advertising is per se taxable:

“Gross receipts shall be deemed to be derived from data extraction transactions if they derive from the sales of advertising services on a digital interface, including, but not limited to advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services that use personal information about the people to whom the ads are being served” (emphasis added).

Only the big guys pay the tax

The proposed DETT would apply to persons with at least $2.5 billion of gross receipts from data extractions transactions in California. During his press conference announcing the DETT, Senator Glazer said the high threshold was intended to limit the tax to only the largest companies engaging in data extraction transactions.

Apportionment and sourcing

Much like Maryland’s Digital Advertising Gross Receipts Tax, the DETT apportionment formula is the ratio of annual gross receipts from data extraction transactions (otherwise known as digital advertising) in California to annual gross receipts from data extraction transactions in the U.S. Gross receipts from data extraction transactions are sourced to California, i.e., assigned to the numerator of the formula, based on location of the user. For purposes of computing the numerator and denominator of the apportionment formula (but not the $2.5 billion threshold), “annual gross receipts in this state” includes the gross receipts of all members that are part of the same unitary group if multiple members of the group engage in data extraction transactions.


Finally, the DETT legislation contains three exclusions, which also add to its questionable legality. The DETT excludes “news media entities,” which are entities “primarily engaged in the business of newsgathering, reporting, or publishing or broadcasting articles or commentary about news, current events, or culture.” Just like Maryland’s Digital Advertising Gross Receipts Tax, this exemption creates First Amendment issues.  The DETT also excludes web hosting services and domain registration services from the definition of “data extraction transaction.”

Next steps

It is expected that Senate Bill 1327 will be heard in the Senate Revenue and Taxation Committee on May 8th, which would likely be the first of several hearings on the proposed DETT.

[1] The introductory caption and short title of the Senate Bill 1327 amendments characterize the DETT as a “Data Extraction Mitigation Fee,” yet the remaining substantive provisions characterize (and treat) the DETT as a “tax.”