Chicago’s New Social Media Amusement Tax

Chicago recently enacted an original and controversial social media amusement tax (SMAT), designed as a revenue-raising measure, primarily to fund mental health initiatives. Effective January 1, 2026, and operating somewhat similar to a sales tax, SMAT will require monthly payments of self-assessed tax due and annually filed tax returns.

The Details

SMAT is imposed on social media companies that collect consumer data on more than 100,000 Chicago consumers in a calendar year, based on monthly calculations. The assessment is $.50 for every Chicago consumer over 100,000 in a month.

Municipal Code of Chicago Section 4-156-1010 defines “social media” to mean websites, applications, products, and internet platforms that allow consumers to view, share, and otherwise engage with images, videos, and audio presented in types and formats including, but not limited to, performance, promotions, memes, augmented reality, artificial intelligence, and live streams.

“Social media business” means a for-profit entity that a) provides individuals with access to social media and b) collects, maintains, uses, processes, sells, or shares consumer data, other than consumer contact information, in support of the entity’s business activities.

“Consumer data” is defined as “any information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked with a consumer, whether directly submitted to the social media business by the consumer or derived from other sources.”

A “Chicago consumer” is “a Chicago resident who uses social media in the City accessed through an account registered with a social media business and whose consumer data is collected by the social media business, regardless of whether the individual is charged for establishing the account or accessing the media.” There will be a rebuttable presumption, however, that a consumer is a Chicago consumer for purposes of this article if information on record with, or available to, a social media business shows a Chicago home address, a Chicago mailing address, or an internet protocol address or other consumer data indicating a primary usage location connected with Chicago. The burden of proving that a consumer is not a Chicago consumer is on the social media business.

Inclusions and Exclusions

Municipal Code of Chicago Section 4-156-1040 defines “amusement” to include engagement with media content delivered through the use of social media for the substantial purpose of entertainment and enjoyment. A social media business is a for-profit entity that in support of its business activities provides individuals with access to social media and collects, maintains, uses, processes, sells, or shares consumer data other than consumer contact information.

This definition does not include:

• News organizations

• Internet search or service providers

• Email services

• Online video games

• Streaming services whose content is not user-generated but does include interactive functions

• Communication services

• Advertising networks that deliver solely commercial content

• Telecommunication carriers

• Broadband services

• Cloud computing services

• Technical support services

As reporting requirements are imposed on a consolidated basis, SMAT calculation does not include intercompany data transfers.

Ryan Can Help

Navigating the nuances of this new tax may create a burden for many out-of-state companies required to collect and remit tax. Many remote sellers with no physical presence may be subject to this tax. In addition, determining proper sourcing of Chicago consumers, particularly given the presumptions tied to address, IP data, and primary usage location, may present significant administrative and technical challenges. Ryan tax professionals can assist with the complexities of compliance, including evaluating sourcing methodologies, registering, collecting, and remitting SMAT.

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals.