Politics
Tech Group Sues Illinois Over Social Media, Digital Ad Taxes
(Thomas Ulrich / Pixabay)
A tech industry trade association sued the state of Illinois Friday afternoon in an effort to block new taxes on social media companies and digital advertisements, records show.
NetChoice, a trade association representing the tech industry, filed suit in Cook County Circuit Court to block the taxes approved as part of the state’s 2026-27 spending plan set to take effect Jan. 1, records show.
Read the lawsuit against the social media tax here and the digital advertising tax here.
Representatives of Gov. JB Pritzker did not immediately respond to a request for comment.
Chicago became the first city in the nation in 2025 to levy a tax on social media companies, forcing them to pay a tax of 50 cents per month for every active user after the first 100,000 users, under the city’s amusement tax authority.
Net Choice has also challenged that tax in court, and that lawsuit is pending.
The taxes violate the Internet Tax Freedom Act, a federal law that prohibits state and local governments from imposing “multiple or discriminatory taxes on electronic commerce,” according to the lawsuits.
Chicago’s social media tax is on track to generate 60% more than officials originally expected, according to city financial data. Those funds have been banked by the city, but not spent, as the legal challenge works its way through the courts.
Because research shows that social media has a negative impact on mental health, particularly for young people, the firms profiting from those services should “contribute fair share to fund additional public health and mental health services for Chicagoans,” according to Mayor Brandon Johnson’s 2026 spending plan.
The state’s social media tax would require the largest social media firms, with 1 million Illinois users or more, to pay $165,000 per month and an additional 50 cents per month for each user over the 1 million user mark, records show.
That is expected to generate $200 million annually, records show.
A separate lawsuit challenges lawmakers’ decision to impose a tax on digital advertisements seen by Illinois residents. Maryland is the only other state to impose a similar tax, which is also the subject of litigation.
Under the tax, companies with more than $1 million in gross receipts from digital advertising services provided in Illinois would be charged 10% on those receipts. Lawmakers say the move could bring in $200 million to $800 million a year.
NetChoice has filed dozens of lawsuits against states attempting to tax and regulate social media, including against a California law designed to shield children from social media and other online content that could harm them mentally or physically.
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
