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HB 4894

DIGITAL AD TAX ACT

104th Regular Session Introduced by Dee Avelar and 10 co-sponsors

Imposes a 10% tax on the Illinois-revenue portion of digital advertising by eligible firms exceeding $150 million in annual Illinois digital ad revenue.

Added Co-Sponsor Rep. Lilian Jiménez
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WeVote Research Nonpartisan
Bill Summary · HB 4894

Summary of HB 4894 (Digital Advertising Tax Act) – Illinois, 104th General Assembly

Purpose and intent

  • Establishes a new tax, the Digital Advertising Tax Act, to tax a portion of a taxpayer’s annual gross revenue derived from digital advertising services in Illinois.
  • Aims to address perceived gaps in modern digital transactions where traditional sales/use taxes are less applicable, arguing that digital platforms often capture value through personal data and targeted advertising.
  • The act targets larger digital advertising platforms, with a threshold designed to exclude smaller players.

Key provisions and changes

  • Tax base and threshold

    • The tax applies to the portion of an eligible taxpayer’s annual gross revenue derived from digital advertising services in Illinois.
    • An “eligible taxpayer” is a person whose annual gross revenues derived from digital advertising in Illinois for the taxable year exceed $150,000,000.
    • The tax is 10% of the eligible taxpayer’s assessable base (i.e., the portion of revenue attributed to digital advertising in Illinois).

  • Definitions (selected)

    • Digital advertising services: Advertising on a digital interface using personal information about the audience (e.g., banner ads, search engine ads, interstitial ads).
    • Digital interface: Any software a user can access (website, part of a website, or app).
    • Annual gross revenue: Revenue from all sources, before expenses/taxes, calculated under GAAP.
    • Assessable base: The annual gross revenue from digital advertising services in Illinois during the tax year.
    • Apportionment factor: Used to determine Illinois-sourced revenue. Numerator = annual gross revenues from digital advertising in Illinois; Denominator = annual gross revenues from digital advertising in the United States.
    • Location of revenue: The Department of Revenue will adopt rules to determine where revenues are derived.

  • Administration and collection

    • The Department of Revenue enforces collection; proceeds go to the General Revenue Fund after administrative deductions.
    • Tax returns are due on or before April 15 of the year following the tax year.
    • Eligible taxpayers must file annual returns and, if anticipated Illinois digital ad revenue exceeds the threshold, must file estimated tax declarations with quarterly estimates (due June 15, September 15, December 15).
    • Taxpayers must attach information required by the Department to determine the Illinois digital ad revenues and maintain records supporting calculations.

  • Payments and penalties

    • Taxes generally paid with the annual return; estimated tax payments required for those exceeding threshold.
    • Penalties apply for failures to file, failure to maintain records, fraudulent returns, or willful violations, with severity:
    • Under $300 due: Class 4 felony.
    • $300 or more due: Class 3 felony.
    • Prosecution for violations may be brought within 3 years of the act.

  • Effective date

    • The act takes effect immediately upon becoming law.

Who would be affected

  • Eligible taxpayers: Large digital advertising platforms and entities with Illinois digital ad revenue exceeding $150 million annually. The calculation uses a multijurisdictional revenue base, applying an Illinois-specific apportionment factor.
  • Department of Revenue: Responsible for defining revenue location, implementing rules, processing filings, and enforcing penalties.
  • General public/state revenue: Revenue from this tax would flow into Illinois’ General Revenue Fund.

Procedural and timeline aspects

  • Filing deadlines:
    • Annual return: Due by April 15 of the year after the tax year.
    • Estimated tax: If exceeding the threshold, declarations due April 15; quarterly estimated returns due June 15, September 15, December 15.
  • Compliance and record-keeping:
    • Taxpayers must keep records of digital advertising services in Illinois and the calculation basis for the tax owed.
    • Returns must be signed under penalty of perjury by the CEO/owner/top official, with departmental forms warning of the perjury commitment.
  • Enforcement and penalties: Strong criminal penalties for noncompliance, fraud, or misreporting, with a three-year statute of limitations for prosecutions.

Notes for readers

  • This bill introduces a 10% tax on a defined portion of digital ad revenue for large players, using a specific apportionment approach to attribute Illinois-relevant revenue.
  • The threshold is designed to exclude smaller digital advertisingfirms from coverage.
  • The text indicates an immediate effective date, though practical implementation would require department rulemaking to specify revenue location and related filing procedures.

Compiled from official sources — confirm details with the bill’s official record.

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