NetChoice respectfully testified in strong opposition to LB 1025, which would impose a new tax on every social media platform in Nebraska with at least 50,001 monthly users. LB 1025’s discrimination is at odds with the Permanent Internet Tax Freedom Act, which prohibits “discriminatory taxes on electronic commerce.” LB 1025 would expressly violate PITFA because the proposed tax specifically and exclusively targets online social media businesses while exempting comparable non-digital businesses that also collect, maintain, and sell consumer data. LB 1025 also raises First Amendment concerns because it targets certain media companies for disfavored tax treatment based on the size of their readership. The Supreme Court has previously struck down taxes that burden speech services as unconstitutional under the First Amendment. Beyond its legal deficiencies, this tax would also inflict significant economic damage on Nebraska’s growing digital economy.
NetChoice Testimony in Opposition to Nebraska LB 1025, Provide for an Excise Tax on Certain Social Media Platform Businesses
February 18, 2026
Nebraska Revenue Committee
Dear Chairperson Brad von Gillern, Vice Chairperson Mike Jacobson and members of the Committee:
On behalf of NetChoice, a trade association of leading internet businesses committed to promoting free enterprise and free expression online, I respectfully submit this testimony in strong opposition to LB 1025, which would impose a new tax on every social media platform in Nebraska with at least 50,001 monthly users.
LB 1025’s discrimination is at odds with the Permanent Internet Tax Freedom Act
The Permanent Internet Tax Freedom Act (PITFA), signed into law in 2016, prohibits “discriminatory taxes on electronic commerce,” where the Congressional report explains:
A discriminatory tax on Internet commerce is defined as one that is either “not generally imposed” or is “not imposed at the same rate” on similar transactions “accomplished through other means” (Congressional Report of Rep. Goodlatte, July 3, 2014).
LB 1025 would expressly violate PITFA because the proposed tax specifically and exclusively targets online social media businesses while exempting comparable non-digital businesses that also collect, maintain, and sell consumer data. Traditional social meeting services—such as social clubs, professional societies, and alumni networks—collect personal data from applications, maintain member directories, and often monetize this information through sponsored events, targeted communications, and membership fees based on demographic profiles. By excluding these offline counterparts from the same tax burden placed on digital platforms, LB 1025 creates a distinction between functionally similar business models based solely on their digital or non-digital nature.
PITFA explicitly prohibits state taxes that single out digital services in ways that create tax obligations not imposed on similar non-digital businesses. By targeting only “social media platform businesses,” this bill creates precisely the kind of discriminatory tax that Congress intended to prevent through PITFA.
Courts have consistently upheld PITFA’s protections against discriminatory digital taxes. In fact, the U.S. District Court for the District of Maryland struck down Maryland’s Digital Advertising Gross Revenues Tax, finding it discriminatory and in violation of PITFA. Nebraska would be inviting similar costly litigation by enacting this proposed tax.
LB 1025 raises First Amendment concerns
LB 1025 also raises First Amendment concerns because it targets certain media companies for disfavored tax treatment based on the size of their readership. The Supreme Court has previously struck down taxes that burden speech services as unconstitutional under the First Amendment.
Specifically, in Minneapolis Star Tribune, the Supreme Court looked at a tax on paper and ink for certain publishers. Because other publishers were excluded, and because the tax only started applying after the publisher spent an initial $100,000 on paper and ink, the Court found that the tax violated the First Amendment. A “special tax” applicable only to “certain publications protected by the First Amendment” is facially discriminatory, and constitutionally problematic.
As the Supreme Court reaffirmed in Moody v. NetChoice, the First Amendment “does not go on leave when social media are involved.” Accordingly, discriminatory taxes targeting social media services are subject to the same constitutional constraints as special taxes on newspapers. LB 1025 is the same sort of “special tax” the Court struck down in Minneapolis Star. Here, just like imposing additional taxes for popular, best-selling newspapers, LB 1025 discriminates against popular social media websites and imposes additional tax liability.
Just as Minneapolis Star imposed no tax on publications who used less than $100,000 in paper and ink, so too does LB 1025 exempt websites with fewer than 50,001 users. This is exactly the sort of discriminatory treatment which violates the First Amendment.
LB 1025 would harm Nebraska’s digital economy and hurt consumers
Beyond its legal deficiencies, this tax would inflict significant economic damage on Nebraska’s growing digital economy. The bill effectively penalizes digital platforms for engaging with Nebraska consumers, creating a disincentive for technology companies to serve Nebraska users or establish operations in your state. This discriminatory tax could prompt social media companies to:
- Restrict or limit services to Nebraska users to avoid tax liability
- Pass costs directly to Nebraska small businesses that advertise on their platforms
- Reconsider investments in Nebraska tech infrastructure and jobs
- Challenge the constitutionality of the tax, resulting in costly litigation for the state
The progressive structure of the tax particularly harms platforms as they grow, imposing ever-higher penalties simply for serving more Nebraskans. This creates a counterproductive incentive against business expansion and innovation.
Perhaps most importantly, this tax would ultimately harm the very Nebraska consumers it purports to protect. Social media platforms provide valuable services that connect Nebraska businesses with customers, enable community engagement, and facilitate communication. The increased tax burden would not simply be absorbed by social media companies but would likely be passed on to Nebraska consumers and businesses in several ways.
Auto dealers across Nebraska who rely on targeted social media ads to reach potential customers would face higher advertising costs, forcing them to either reduce their digital marketing reach or pass these additional expenses on to car buyers through higher vehicle prices. Similarly, individuals who use Facebook Marketplace to sell personal items or find affordable secondhand goods would likely see new fees as the platform attempts to recoup tax costs, directly impacting everyday consumers engaged in casual commerce.
Nebraska has long been recognized for innovation and economic opportunity. Rather than pursuing this legally problematic and economically harmful taxation of digital services, we encourage the legislature to work collaboratively with the technology industry on policies that harness the state’s strengths to build a more competitive business environment.
By focusing on approaches that encourage innovation and growth rather than imposing punitive taxes on specific sectors, Nebraska can expand its overall tax base while fostering a thriving digital economy that benefits all residents.
Sincerely,
Bartlett Cleland
General Counsel, NetChoice (The views of NetChoice expressed here do not necessarily represent the views of all NetChoice members.)
NetChoice is a trade association that works to protect free expression and promote free enterprise online.