California legislators are eying a proposal to place a tax on social media platforms.
The state legislature approved the bill, spearheaded by Democratic state Rep. Josh Lowenthal, with an 8-4 vote in the Assembly Privacy and Consumer Protection Committee.
AB 796 would place an unspecified tax rate on the gross receipts that social media companies earn from digital advertisements. It would take effect for tax years beginning Jan. 1, 2026, with all funds raised from the imposed tax being deposited into a social media safety trust fund to finance programs related to youth use of the platforms.
However, some details about the legislation remain scant. Lowenthal said that a discussion about the tax rate would take place as it moves to the Assembly Revenue and Taxation Committee, according to Bloomberg Law.
The Washington Examiner reached out to Lowenthal’s office outside of business hours for comment.
The legislation would also raise funds for Social Security and mental health support, according to the bill text.
“The bill would establish various accounts within the fund and would allocate money into those accounts for expenditure according to specified purposes, including an Education Account, Mental Health Care Account, Research and Development Account, and Social Services Account,” it says.
The California Taxpayers Association led small business organizations and other groups in lambasting Lowenthal’s legislation as unlawful. In a letter to lawmakers, they said it constituted a discriminatory tax on electronic commerce and digital advertising that violates the 1998 Internet Tax Freedom Act.
“A tax on digital advertising will increase costs for California advertisers and consumers, will be met with legal challenges, and will negatively impact California’s business climate,” the coalition said earlier this month.
TRUMP SHOWS OPPOSITION TO MILLIONAIRE TAX: ‘DISRUPTIVE’
“Social media companies subject to the tax would pass the cost on to their California advertisers, either indirectly through price increases or more directly by adding the tax to their invoices, like a sales tax,” the letter continued.
A similar bill introduced in the California legislature last year sought to impose a 7.25% gross receipts tax on in-state digital advertising, applied to companies with worldwide revenue of $2.5 billion or more, according to Tax Foundation. SB 1327, which died in the state Assembly, would have applied the tax to advertising networks and platforms, including search engines, social media networks, and streaming platforms.