Chicago’s New Social Media Tax Faces Legal Challenge

Chicago has adopted a first-of-its-kind tax targeting certain large social media platforms as part of the City’s 2026 budget. Under the Social Media Amusement Tax (SMAT), qualifying platforms with more than 100,000 monthly active Chicago users are generally required to pay a tax of 50 cents per user, per month. City officials originally estimated the measure would generate approximately $31 million annually to support expanded mental health services and related public programs. Early collections, however, have reportedly exceeded those projections, suggesting the tax may produce significantly more revenue than initially anticipated.

Unlike taxes imposed directly on individual users, the ordinance places the obligation on the social media platforms themselves. The measure applies to several widely used platforms, including Facebook, Instagram, TikTok, LinkedIn, X, Reddit, Snapchat, Pinterest, Twitch, and Nextdoor. By limiting the tax to platforms exceeding the 100,000-user threshold, the City sought to target larger technology companies while excluding smaller platforms. The revenue generated by the tax is intended to help fund mental health initiatives and other services identified in the City’s budget.

Supporters contend that the ordinance requires large technology companies to contribute toward addressing the societal interests associated with social media while creating a dedicated funding source for mental health programs. The proposal also received support from organizations aligned with Mayor Brandon Johnson’s broader fiscal agenda, including the Chicago Teachers Union. Opponents, however, argue that the measure unfairly singles out a specific category of online platforms and raises constitutional concerns. The ordinance has already been challenged in court by the technology trade association NetChoice, which alleges, among other things, that the tax violates First Amendment protections by treating certain online platforms differently from other forms of media.

Although the ordinance currently applies only to qualifying social media platforms, the litigation could have broader implications for social media sites and municipalities exploring new approaches to taxing online services. The outcome may help define the scope of local governments’ authority to impose taxes on web-based platforms and shape future efforts to regulate emerging technology companies through taxation. Businesses operating in the technology sector, as well as organizations that closely monitor developments in digital regulation, should continue following the litigation as the legality of the ordinance is resolved.

For more information about emerging technology legislation and regulatory developments in Illinois, please contact the qualified attorneys at Rock Fusco & Connelly, LLC.