• by Wendy Davis , 3 hours ago

The technology industry group NetChoice is suing to strike down two new Illinois tax laws -- one that taxes "providers of targeted advertising services" and one that imposes taxes on social-media platforms.

The Targeted Advertising Services Tax Act charges "providers of targeted advertising services" a monthly tax of 10% of gross receipts derived from the targeted advertising services provided in the state.

That measure defines "targeted advertising" as programmatic ads that use "personal information" about the recipients and are served through a "digital interface or any other method of delivery."

The law exempts ads on digital interfaces that are owned or operated by news entities.

The social-media tax law imposes fees ranging from 10 cents per user per month for platforms with at least 100,000 Illinois users, to 50 cents per user per month for platforms with at least one million users.

Both measures will take effect in January, unless they are blocked in court.

NetChoice claims in two separate  complaints, both filed late last week in Cook County Circuit Court, that the measures are invalid for several reasons.

Among others, NetChoice claims the laws violate the First Amendment and are inconsistent with the Internet Tax Freedom Act -- a 1998 law that prohibits states from imposing a tax on digital services unless taxes are imposed on "similar" non-digital services.

The group argues the tax on targeted ads violates the Internet Tax Freedom Act because the tax is assessed on providers or programmatic ads, but not on providers of ads appearing on billboards, magazines or other print media.

The organization also says the exemption for news entities violates the First Amendment due to the statute's definitions.

Specifically, the statute says a news entity must be "engaged primarily in the business of newsgathering, reporting, or publishing articles or commentary about news, current events, culture, or other matters of public interest," and is not "an entity that is primarily an aggregator or re-publisher of third-party content."

NetChoice argues that this definition is content-based, and therefore unconstitutional.

A similar law in Maryland was struck down last month by the Maryland Tax Court (an agency), but the state attorney general is appealing that ruling to Anne Arundel County Circuit Court.

NetChoice is making comparable arguments in its suit challenging the tax on social media platforms.

The tech-funded policy group Chamber of Progress unsuccessfully urged Illinois lawmakers to reject the tax on targeted ads, arguing that the law "directly targets the economic model behind modern online platforms, which rely heavily on digital advertising to deliver content, recommendations, and services to users."

That organization argued in a May letter that the bill could lead platforms to reduce "targeting precision," limit ad features, or change the way ads are delivered.