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April 8, 2021

Merchants group blasts proposed digital advertising tax

Yehyun Kim | CT Mirror The state Capitol.
By Zachary Vasile

The state’s retailers’ lobby is urging Gov. Ned Lamont to reject a tax on digital advertising put forward by House Democrats.

The proposal, included in a bill known as HB 6187, would establish a 10% tax on the annual gross revenues derived from digital advertising services in the state for any business with annual worldwide gross revenues exceeding $10 billion.

While transparently aimed at out-of-state technology giants such as Google and Facebook, officials with the Connecticut Retail Merchants Association argue those companies will simply pass on the expense to small local businesses looking to promote themselves online.

“The unintended consequences will be felt by Connecticut retail businesses whose success or failure, particularly now, depends significantly on digital advertising, and whose balance sheets are reeling from the economic impact of COVID-19,” the group wrote in a letter to Lamont. “No matter how the bill is drafted, the State of Connecticut cannot stop these companies from raising their rates to our members to offset the increased cost to them.”

CRMA officials said the tax proposal comes at a particularly inopportune time, as many small retailers have turned to online marketing as a way to connect with prospective customers during the pandemic.

“Everyone is online constantly,” the association wrote. “Digital advertising has been our lifeline. Imposing a tax on digital advertising, even with the best of intentions, would do more harm than good, and it is the small businesses and residents of Connecticut who will be harmed.”

Maryland in February became the first state in the country to place a levy on digital advertising, using language close to Connecticut’s bill. Similar measures have been proposed, but not adopted, in New York, Indiana, Nebraska, Oregon, and Washington.

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