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S 2028Sales & Use

Taxation - Sales and Use Taxes - Liability and Computation

A tiered tax on large global companies selling digital ads in RI, funding housing, climate projects, and school lunches.

Held for study
Population
Affected
35
Email Legislator
Introduced Jan 9, 2026Committee Senate Finance

Plain-English Summary

This legislation establishes a new "Digital Advertising Services Tax" on companies that sell digital advertisements in Rhode Island. The tax rate is tiered, ranging from 2.5% to 7.5%, applied only to companies with global annual revenues exceeding $100 million. The revenue collected is earmarked for specific state initiatives: 20% for housing development, 10% for the universal lunch program, 10% for RIPTA, and substantial portions for climate resiliency projects. While companies must pay this tax, the bill prohibits them from adding a specific surcharge to customer invoices that identifies this cost, though they may disclose the tax amount.

For younger readers

This new law requires very large internet companies to pay extra money to the state when they sell advertisements on websites or apps in Rhode Island. The bigger the company is, the more they have to pay. The state will use this money to fix up houses, help pay for public buses, protect nature from climate change, and provide free school lunches for students. The law also says these companies cannot add a special extra charge to a customer's bill just for this tax, but they have to pay it themselves.

Who & Where It Applies

Impacted groups
Digital Advertising PlatformsOnline AdvertisersPublic Transit RidersPublic School StudentsHousing Advocates
Impacted communities
All

Constitutional & Fiscal Check

High risk

High Risk. Similar legislation in other states (e.g., Maryland) has faced significant legal challenges under the Internet Tax Freedom Act (ITFA), which prohibits discriminatory taxes on electronic commerce. Furthermore, the provision prohibiting companies from listing the tax as a specific surcharge on invoices likely violates First Amendment protections regarding commercial speech and the right to communicate truthful pricing information to consumers.

Estimated cost
Digital Ad Sellers ($100M-$1B revenue): 2.5% of assessable base; Digital Ad Sellers ($1B-$5B revenue): 5.0% of assessable base; Digital Ad Sellers (>$5B revenue): 7.5% of assessable base
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Generates significant revenue from large, profitable global corporations to fund essential social safety nets, including affordable housing and universal school lunches.
  • Allocates substantial funding (40% of total revenue) toward climate resiliency and environmental protection, directly addressing the climate crisis and supporting sustainable infrastructure.
  • Invests in public transportation (RIPTA), which promotes equitable mobility for low-income residents and reduces reliance on personal vehicles.
  • Corporations may simply raise overall advertising prices to cover the tax, which could inadvertently hurt small local businesses and non-profits that rely on digital advertising to survive.
  • Reliance on a consumption-style tax for critical services like food and housing can be volatile and less stable than funding these programs through progressive income or wealth taxes.
  • The prohibition on line-item surcharges might hide the corporate transfer of costs to consumers, reducing transparency regarding how corporations pass tax burdens onto the public.
For Conservatives
  • Ensures that massive global corporations, which often minimize tax liabilities, contribute financially to the infrastructure and economy of the state where they do business.
  • Provides a dedicated revenue stream for municipal resiliency plans, potentially alleviating the pressure on local property taxes to fund these necessary upgrades.
  • Diversifies state revenue sources, potentially preventing increases in personal income taxes or broad-based sales taxes paid directly by residents.
  • Imposes a punitive tax structure based on global revenue rather than local profit, which penalizes success and may discourage business investment in the state.
  • Restricts corporate free speech and business freedom by legally prohibiting companies from itemizing this specific tax on customer invoices as a surcharge.
  • Expands the size of government by creating a new revenue stream specifically designed to fund extensive social welfare programs and environmental mandates.

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