Tax & Budgets, Technology & Privacy
How States Are Taxing Digital Goods, Social Media, and Targeted Advertising
July 30, 2026 | Andrew Jones
State lawmakers introduced 80 bills across 22 states this year to tax digital goods and services, with 12 signed into law as revenue growth slows and legislators target the technology industry. Utah and Illinois enacted new taxes on targeted advertising in 2026, with Utah's approach attempting to avoid Internet Tax Freedom Act challenges by focusing on individualized data profiles rather than digital advertising directly. Illinois became the first state to tax social media platforms, imposing a monthly fee of $0.10 to $0.50 per user, though the tax faces legal challenges and questions about how users would be counted and apportioned. New Jersey enacted data broker registration fees ranging from $5,000 to $1.5 million annually, while Kentucky expanded its sales tax base to include data brokering services. California, Colorado, Washington, and Utah expanded their sales tax bases to cover digital goods and services, including software-as-a-service and cloud services, as states move away from taxing only tangible personal property.
