NYS Senator Liz Krueger introduces legislative proposal to tax the collection of consumer data

State News

ALBANY, N.Y. (NEWS10) — Proposed legislation (S.4959) was introduced Monday by New York State Senator Liz Krueger, Chair of the Senate Finance Committee, that would apply a tax on the collection of New Yorkers’ consumer data by businesses that use it for commercial purposes.

“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,” said Senator Krueger. “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.”

Currently, individual data related to consumer interests is a major valuable asset to companies, like social media, who collect massive amounts of information that are then analyzed and used to increase advertising opportunities. This is only one of the ways in which data is collected and used.

Companies who use this data can include:

  • Big box retailers
  • Internet retail platforms
  • Credit card companies
  • Multimedia entertainment providers
  • Other large companies

The data can be used by these companies for a variety of purposes such as selling advertising to analyze the effectiveness of their websites. Much of the data comes from consumers themselves who are often unaware of their data being collected while online.

“This legislation proposes a smart way to address a significant gap in existing state tax systems,” said Peter Enrich, Emeritus Professor at Northeastern University School of Law and a nationally recognized expert on state tax policy. “Many large businesses derive tremendous economic benefits from amassing detailed information about the individuals with whom they interact, but this extraction of value from our personal information goes untaxed. This proposal provides a relatively simple and focused way to hold businesses accountable for some of the value they extract from personal data about state residents.”

The newly proposed legislation, S.4959, would reportedly create an excise tax on the collection of New Yorkers’ consumer data based on how many New Yorkers a commercial data collector collects data on within a month. The tax would apply regardless of how the data is collected. It would be imposed on for-profit businesses that collect data, excluding basic contact information, on more than 1 million New Yorkers in a given month.

The data collection tax would reportedly be applied on a graduated rate schedule beginning at 5 cents per person per month for commercial data collectors collecting data on over a million New Yorkers in a month. The rate gradually increases, with the highest rate set at 50 cents per person per month paid on the number of individual New Yorkers over 10 million where data is collected in a month.

“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,” said Professor Enrich. “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.”

Reportedly only a small fraction of all businesses collect data on over a million New York consumers monthly, the threshold for being subject to the tax, and the tax paid per consumer is said to be extremely modest.

“This is the most creative, thoughtful proposal to tax data I have seen so far,” said Richard Pomp, former Director of the New York Tax Study Commission, law professor, and author of “State and Local Taxation, 9th Edition.”
 

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