Illinois Social Media Tax | Illinois 2026 Budget

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Illinois’ new social media taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. was in the works for months, but it has the appearance of something lawmakers hit “post” on too soon. It’s not just that social media taxes have very little justification, though that’s certainly true. Nor is it just that the new tax opens the state up to costly litigation it has a very good chance of losing, though that’s true as well. It’s that the whole thing looks like something dashed off with very little thought. Illinois plans to impose a complicated, legally fraught new tax based on a few pages of confused, contradictory, and almost laughably incomplete legislative text embedded in the new budget.

Among the questions the budget writers failed to answer: what, exactly, is being taxed?

Based on subsection B, there’s a monthly fee (tax) on “the number of Illinois users from whom the social media platform collects data within a month.” But for some reason, this is based on a monthly report obligated in subsection A, reporting the “average number of monthly users of the platform located in the State of Illinois.”

The “average number of monthly users” is perplexing; in any given month, someone is either a social media user or they are not. Over a longer period of time (say, a year), there might be an average number of monthly users, but there can’t be an average number of monthly users within a specific month. That, however, is a trifle. The real problem is that virtually nothing is defined.

Let’s begin here: what is a user?

This isn’t a philosophical question. It’s an eminently practical one. Is a user a person or an account? If a person has multiple accounts on the same social media platform, does each account constitute a separate user, or is the person one user? To the extent that those accounts are not linked and social media companies lack identifying information on the owners of free accounts, what information, if any, may they use to associate multiple accounts with a single person?

If someone has accounts across multiple services operated by a single company—for instance, Facebook, Instagram, and (depending on how broadly “social media” is defined) Messenger and WhatsApp accounts—is each taxed separately, or is the person treated as a single user across multiple related services? And if an account is shared by multiple people (family members, a business account, etc.), is that one user or multiple? If the latter, how should a social media company attempt to ascertain how many users are on the account?

Indeed, is an account even required? If someone reads a Reddit thread without an account, do they count as a user? If someone has multiple accounts, could tax be imposed on all of them even if the person only accesses a social media site from one of them (or without logging in at all)? The law defines a social media platform, in part, as a service that permits people to become registered users or create profiles, but it (1) seems to distinguish registered users from the creation of profiles, (2) never explicitly says that registration is necessary for taxation, and (3) omits the modifier “registered” in every place where the tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. is defined.

Now let’s refine that: what is an Illinois user?

Is it a user who lives in Illinois, even if, for the month in question, they’re out of state and accessing their account from elsewhere? Is it someone with a home or billing address in Illinois who also accessed their account from Illinois during the month? Would it cover a non-resident who accessed their social media accounts from Illinois at some point during the month, perhaps during a layover at O’Hare or while in Chicago for a convention?

And whatever definition is used, how would their Illinois connection be determined for tax purposes? With a paid account, a billing address should be on record, but most social media accounts are free, few have mailing addresses expressly attached to them, and some are wholly anonymous. Should social media platforms rely on IP addresses, despite their limitations? If so, if a person’s IP usually resolves to Ohio but pings in Illinois occasionally, and assuming for now that Illinois does not intend to tax non-residents when they’re in the state, can the social media company exclude that user? Do they have to document anything, and if so, to what degree can they protect users’ privacy?

The next step: what constitutes an Illinois user from whom...