Subnational Digital Services Taxation

45 Pages Posted: 24 Mar 2021 Last revised: 6 Jan 2022

Date Written: March 23, 2021


Existing tax regimes fail to tax digital services appropriately. Digital services based on extracting and monetizing user data—most notably digital advertising—are particularly problematic because tax regimes do not adequately account for the enormous value derived from user data.

Internationally, taxing jurisdictions have recognized these failures and commenced a controversial push toward new digital services taxes or DSTs. Subnational taxing jurisdictions in the United States face the same issues and are searching for solutions.

This Article begins by examining the motivations and justifications for digital service taxation at both the international and subnational levels. These justifications center on antiquated tax regimes that do not sufficiently capture profit from new business models, particularly business models that rely on valuable data extracted from users in the taxing jurisdiction.

Next, this Article presents options for subnational digital service taxation. These options range from slightly modified existing tax regimes to novel approaches that may more appropriately tax digital services, specifically those services that extract and monetize user data. This Article also analyzes the constitutional, federal preemption, and sourcing challenges facing subnational digital services taxes.

This Article concludes by examining how subnational taxing jurisdictions may most effectively tax digital services. Although states have started to embrace digital advertising taxes modeled after European digital services taxes, these taxes are narrow and susceptible to challenge. Subnational jurisdictions have several better options, including publicly traded stock-based taxes and data mining taxes.

Keywords: tax, state, local, digital, advertising, data, collection, mining, international, monopoly, antitrust, dst, service, ITFA, internet, Maryland, New York, stock, technology, politics, constitution, commerce clause, sourcing, user, OECD, pillar

Suggested Citation

Appleby, Andrew D., Subnational Digital Services Taxation (March 23, 2021). 81 Maryland Law Review 1 (2022), Stetson University College of Law Research Paper No. 2021-3, Available at SSRN:

Andrew D. Appleby (Contact Author)

Stetson University College of Law ( email )

1401 61st Street South
Gulfport, FL 33707
United States
727.562.7327 (Phone)

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