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H 8198Sales & Use

Taxation - Sales and Use Taxes - Liability and Computation

This bill imposes a tax on digital ads sold by large global companies to fund housing, transit, and school lunches.

Held for study
Population
Affected
65
Email Legislator
Introduced Feb 27, 2026Committee House Finance

Plain-English Summary

This legislation creates a "Digital Advertising Services Tax" on digital advertisements sold within Rhode Island. The tax applies to purchasers but is collected by the advertising platform (retailer). The tax rate creates a tiered system based on the global annual revenue of the entity, ranging from 2.5% for revenues over $100 million to 7.5% for revenues over $5 billion. The revenue generated is specifically allocated to public transit (RIPTA), climate resiliency, affordable housing, a universal school lunch program, and the state general fund. Advertisers are prohibited from adding a specific surcharge line item for this tax.

For younger readers

This bill creates a new rule for big companies that sell advertisements on the internet. If a company makes a huge amount of money around the world, they have to pay a tax on the ads they sell in Rhode Island. The money collected from this tax will be used to fix up buses, help protect the environment, build houses for people who need them, and provide free school lunches for students. The companies are not allowed to add a specific extra fee to a customer's bill just to pay for this tax.

Who & Where It Applies

Impacted groups
Large Digital Advertising Platforms (e.g., Google, Facebook)Businesses purchasing digital advertisingPublic Transit Riders (RIPTA)Public School StudentsHousing Developers
Impacted communities
All

Constitutional & Fiscal Check

High. Similar taxes (like Maryland's) have faced federal court challenges regarding the Internet Tax Freedom Act (ITFA), which prohibits discriminatory taxes on electronic commerce, and the Commerce Clause. Additionally, the provision prohibiting companies from listing the tax as a specific surcharge (Section d) may violate First Amendment protections against compelled speech or restrictions on commercial speech, as it dictates how a business communicates costs to consumers.

Estimated cost
Purchasers of digital advertising: 2.5% to 7.5% of ad cost
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Generates significant dedicated revenue streams for vital social safety net programs, including the universal lunch program, affordable housing development, and public transit (RIPTA).
  • Implements a progressive revenue structure that targets massive corporations with global revenues exceeding $100 million, ensuring that the wealthiest entities contribute more to the public good.
  • Prioritizes environmental justice by allocating substantial percentages of the revenue to the statewide climate resiliency fund, municipal resiliency plans, and university research.
  • Corporations may inevitably pass the cost of the tax down to local small businesses and non-profits who buy advertising, effectively making it a regressive cost on smaller community entities.
  • Similar legislation in other states has faced significant legal challenges, suggesting this bill could result in costly litigation and delayed funding for the promised social programs.
  • The reliance on consumption-based taxation (advertising sales) can be volatile compared to more stable forms of wealth or income taxation, potentially leading to budget gaps for the funded services in economic downturns.
For Conservatives
  • Directly targets "Big Tech" and massive global media conglomerates, which aligns with some conservative desires to check the power and influence of these specific corporate entities.
  • Allocates twenty percent of the revenue to the general fund, which could theoretically help offset deficits or reduce the need for increases in personal income or property taxes.
  • Ensures transparency by allowing companies to disclose the tax amount in invoices, preventing the government from hiding the cost of the tax completely from the consumer.
  • Imposes a new, aggressive tax on business transactions, which violates core principles of free markets and could discourage digital commerce within the state.
  • Expands the size and scope of government by creating permanent funding streams for social welfare programs like universal school lunches and climate change initiatives.
  • Infringes on business freedom and free speech by legally prohibiting companies from itemizing the tax as a specific surcharge on customer bills, forcing them to hide the mechanism of government taxation.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 34 additions

SECTION 1. Chapter 44-18 of the General Laws entitled "Sales and Use Taxes — Liability and Computation" is hereby amended by adding thereto the following section: 44-18-36.2. Digital advertising services tax.

(a) There is hereby levied and imposed, upon every purchaser of digital advertising services, in addition to all other taxes and fees now imposed by law, a local digital advertising services tax upon each and every digital advertisement sold within the state of Rhode Island at a rate of:

(i) Two and one-half percent (2.5%) of the assessable base for a person with global revenues of one hundred million dollars ($100,000,000) through one billion dollars ($1,000,000,000);

(ii) Five percent (5.0%) of the assessable base for a person with global revenues of one billion dollars ($1,000,000,000) through five billion dollars ($5,000,000,000); and

(iii) Seven and one-half percent (7.5%) of the assessable base for a person with global revenues of five billion dollars ($5,000,000,000) through fifteen billion dollars ($15,000,000,000).

(b) The tax shall be paid to the tax administrator by the retailer at the time and in the manner provided, pursuant to rules and regulations promulgated by the tax administration pursuant to § 44- 1-4.

(c) All sums received by the division of taxation under this section as taxes, penalties, or forfeitures, interest, costs of suit, and fines shall be distributed at least annually and credited and paid by the state treasurer as follows:

(i) Ten percent (10%) to the Rhode Island public transit authority (RIPTA) general operating budget;

(ii) Fifteen percent (15%) statewide climate resiliency fund;

(iii) Five percent (5%) to the university of Rhode Island resiliency toolkit;

(iv) Twenty percent (20%) to the housing development fund through the department of housing;

(v) Ten percent (10%) to the universal lunch program statewide;

(vi) Twenty percent (20%) to the municipal resiliency plans fund; and

(vii) Twenty percent (20%) to the general fund.

(d) A person who derives gross revenue from digital advertising in this state, shall not charge customers additional fees or surcharges specifically identified as the digital advertising tax; however, nothing in this section prohibits providing a separate statement or disclosure of the tax amount in invoices or communications to customers.

(e) This local digital advertising services tax shall be administered and collected by the division of taxation, and unless provided to the contrary in this chapter, all of the administration, collection, and other provisions of chapters 18 and 19 of this title apply.

SECTION 2. This act shall take effect on July 1, 2026