On February 20, 2020, the Maryland House of Delegates introduced HB 1628, which would reduce the sales tax rate from 6% to 5% and expand the base to tax almost all services. If passed, the bill would take effect January 1, 2021. This bill is sponsored by key members of House leadership, including the House Majority Leader, the Chief Deputy Majority Whip, and the Chairs of the Ways and Means, Economic Matters, and Appropriations Committees. The bill is currently assigned to the House Rules and Executive Nominations Committee.

The Eversheds Sutherland SALT Team will continue to follow HB 1628, along with Maryland legislators’ attempts to tax digital goods and digital advertising services.

During a hearing held on February 20, 2020, the South Dakota House of Representatives’ Taxation Committee approved an amendment to House Bill 1284, striking the proposed elimination of the sales tax exemption for advertising services. The bill’s sponsor, Representative Finck (Republican), introduced the amendment himself. He clarified that he did not intend to tax all advertising services. Rather, he thinks that there are certain services being misconstrued as “advertising” that should be subject to sales tax (such as website creation). He expressed his hope that this issue would be addressed in further discussions. Members of the Taxation Committee noted that a tax on advertising and business inputs would cause economic distortion, raise production costs, and place businesses at a competitive disadvantage. The bill, as amended, is now headed to the House of Representatives’ Transportation Committee for further discussion on its remaining provisions, which would create a road improvement priority fund.

Florida’s proposed tax on peer-to-peer car sharing companies, H.B. 377, cleared its first hurdle and passed the state House Ways and Means Committee on February 11. The bill would require car-sharing companies to collect a 6% sales tax on vehicle leases made through their platforms. Also, under the proposed bill, leases made through the company platforms will be subject to a $2 surcharge.

Missouri lawmakers have proposed H.B. 1957, which would require vendors engaging in business activities in Missouri with gross receipts from in-state sales of tangible personal property totaling $100,000 or more during a 12-month period to collect and remit use tax. The bill would also require marketplace facilitators that reach the economic nexus threshold by January 1, 2021 to collect and remit sales and use tax on behalf of third party sellers. A similar measure, S.B. 648 was also introduced in the state Senate.

On February 6, 2020, South Dakota Representative Finck introduced House Bill 1284, which would repeal the sales tax exemption for sales of advertising services. The South Dakota sales tax broadly applies to sales of services, unless specifically exempt. The bill has since been referred to the House of Representatives’ Taxation Committee. On Thursday, February 20th, the committee will hold a hearing on the bill at 7:45 a.m. Central. The hearing can be live streamed here.

On February 11th, West Virginia Delegate Cody Thompson (Democrat) introduced House Bill 4898, which would impose a general data mining service tax. The bill would require “commercial data operators” generating revenue from the use, collection, processing, sale, or sharing of West Virginians’ user data to pay the tax at the rate of one cent per dollar of value of user data. The Commissioner would be granted the authority to develop the method to calculate the value of user data.

A commercial data operator is “an entity acting in its capacity as a consumer online services provider or data broker that: (A) generates a material amount of revenue from the use, collection, processing, sale, or sharing of the user data; and (B) Has more than 10,000 unique monthly visitors or users in West Virginia for a majority of months during the previous one-year period.” “User data” is defined as “any information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked with an individual user, whether directly submitted to the commercial data operator by the user or derived from the observed activity of the user by the commercial data operator.” The bill would require each commercial data operator, at least every 90 days, to provide an assessment of “the economic value that the commercial data operator places on the data of its users,” along with identifying the types of data it collects from users and the ways that data is used.

Mississippi law requires “retailers” to collect and remit sales and use tax. In August 2018, the Mississippi DOR issued guidance that remote sellers with in-state sales above $250,000 are retailers required to collect sales and use tax. H.B. 379 would expand the definition of retailer to include persons who facilitate third-party sales with the same in-state sales threshold. The bill would take effect upon passage.

Under current Kansas DOR guidance, all remote sellers, regardless of size, are required to collect sales and use taxes. Kansas has introduced two bills to address the taxation of digital sales. H.B. 2537 would introduce a safe harbor for remote sellers with under $100,000 of gross revenues in the state. Additionally, H.B. 2513 would first impose the duty to collect sales and use taxes on marketplace facilitators that exceed a $100,000 in-state sales threshold. Last year, the Kansas governor vetoed a marketplace facilitator bill.

On February 13, 2020, the Nebraska Legislature’s Revenue Committee heard testimony on Legislative Bill 989, which would expand Nebraska’s sales tax base to include sales of digital advertisements.

After an introduction by the bill’s sponsor, Senator Justin Wayne, the Revenue Committee heard testimony from four witnesses, each opposing the bill. The Committee also received numerous letters in opposition, including from the Council On State Taxation, the Internet Association, and the Nebraska Press Association, along with 57 additional letters.

Summary of Legislative Bill 989

On January 14, 2020, the Nebraska Legislature introduced L.B. 989, which proposes to expand Nebraska’s existing sales and use tax law to retail sales of “digital advertisements.” The bill defines “digital advertisement” as “an advertising message delivered over the Internet that markets or promotes a particular good, service, or political candidate or message.” The bill does not contain any mechanism for sourcing digital advertisements to Nebraska. If enacted, sales of digital advertisements would be subject to sales tax, beginning October 1, 2020.

The fiscal note estimates that the bill would raise $27.1 million in revenue for FY 2020-21, $43.7 million for FY 2021-22, $47.1 million for FY 2022-23, and $50.6 million for FY 2023-24.

Revenue Committee Hearing

Senator Wayne, in support of his bill, testified that there should be parity between the purchase of physical advertisements and online advertisements. He questioned why he paid sales tax on the purchase of yard signs for his campaign and construction company, but did not pay sales tax when he placed a similar advertisement online. Senator Wayne acknowledged that there are some issues with the bill, but he believes that it does not violate federal or constitutional law. Senator Wayne passed out amendments to the bill to the Committee members, but he did not discuss or read the amendments into the record. After being asked by the Committee how L.B. 989 would impact newspapers, he stated that he would support exempting newspaper advertisements and commercials from sales tax; he stressed his desire to impose sales tax on the digital equivalent of yard signs.

Representatives from the Nebraska Broadcasters Association, Lincoln Independent Business Association, and Nebraska Grocery Industry Association, along with a lobbyist representing 29 businesses and associations (including the Motion Picture Association, Lincoln Chamber of Commerce, Nebraska Licensed Beverage Association, Nebraska Press Association, Nebraska Broadband Coalition, and Nebraska Retail Federation) testified in opposition to the bill. They raised various concerns, including:

  • The bill would drive business out of the state;
  • Media outlets would receive less advertising revenue because companies would not raise their advertising budgets to account for the new tax;
  • The tax would be passed on to Nebraska businesses and customers;
  • The tax may violate the Internet Tax Freedom Act because it does not apply to non-digital advertising; and
  • The tax may violate the First Amendment of the United States Constitution because it specifically taxes advertising for a political candidate or message.

One of Many

Nebraska is not alone in its efforts. Several other states (Maryland, New York, and South Dakota) have proposed legislation to expand their sales taxes to advertising services or proposed entirely new taxes on digital advertising services or data.

Next Steps

Nebraska has a unicameral legislature. Thus, the bill will only need to pass one house before being sent to the governor for signature. However, the legislature will need to move quickly as Nebraska has a relatively short legislative session. The legislature is scheduled to adjourn on April 23rd.

The Eversheds Sutherland SALT team will continue to follow Nebraska Legislative Bill 989 during the legislative session, along with the other advertising service and data tax bills.