NY State Senator Introduces Bill to Tax Consumer Data Collection

On Monday, Democratic New York state Sen. Liz Krueger, Chair of the Senate Finance Committee, announced that she has introduced Senate Bill S.4959, which would place a tax on the collection of New Yorkers’ data collection by businesses that use this data for commercial purposes.

Senator Krueger pointed out the vast amount of data that companies collect on consumers, which they use for various purposes, including targeted advertising. Specifically, Senator Krueger noted, “Big box retailers, internet retail platforms, credit card companies, multimedia entertainment providers and most other large companies maintain databases that they analyze for a range of purposes, from selling advertising to evaluating the effectiveness of their websites. Much of this data comes from the consumers themselves, often without any awareness on the part of the individual whose data is being collected.”

The bill would “create an excise tax on the collection of New Yorkers’ consumer data based on the number of New York individuals on whom a commercial data collector collects within a month.” Specifically, this bill targets consumer data collection on more than 1 million New Yorkers in a month by for-profit businesses. This tax would apply no matter how this data is collected but excludes the collection of basic contact information.

The bill taxes on a graduated scale; it starts at 5 cents per individual per month, which at the minimum of more than 1 million individual New York consumers will cost affected businesses at least $50,000.05 per month. The tax rate gradually increases both in the rate per individual over a threshold and an additional flat rate. The highest rate is 50 cents per individual over 10 million per month if data is collected on more than 10 million New York consumers in a month, plus a flat rate of $2.25 million. The press release noted that only a small portion of businesses collect data on more than a million New York consumers in a month and “the tax paid per consumer is extremely modest.”

“It’s been said of social media that if you’re not paying for it, then you’re the product, and when it comes to today’s internet, that’s more true than ever,” Senator Krueger said in a press release. “Every time New Yorkers visit social media sites or shop online, their data is being harvested for profit, often without their having any idea it’s happening. Big companies are making a fortune from New Yorkers’ data – it’s time for New Yorkers to get a little something in return.”

This comes as other states have taken measures to remedy consumer data collection for advertising purposes. For example, Maryland legislature overrode the governor’s veto of their first-of-its-kind digital advertising tax, prompting a lawsuit against the state by the Chamber of Commerce, digital advertisers and industry groups that asserted that the Act is unlawful because it is preempted by the Internet Tax Freedom Act and violates the Due Process Clause and the Commerce Clause of the U.S. Constitution.

Peter Enrich, Emeritus Professor at Northeastern University School of Law, noted in the press release “Several states are considering taxing digital advertising, which is one significant use of consumers’ personal data, as another way to tax a segment of this data extraction. This proposal, however, addresses the issue more uniformly and simply, and, as a result, will be significantly less vulnerable to challenge under the federal Internet Tax Freedom Act or the federal constitution.”

According to the bill’s webpage, it is currently with the Senate’s Budget and Revenue Committee.