Beginning January 1, 2026, the city of Chicago will impose a new social media amusement tax (SMAT) on for-profit social media businesses¹ that provide individuals with access to social media and collect consumer data² on more than 100,000 Chicago consumers³ in a calendar year. The tax is imposed at a rate of $0.50 per month for each Chicago consumer in excess of 100,000 users. It is estimated the SMAT will generate $31m in revenue in Chicago's 2026 fiscal year.

Social media includes any content shared and viewed on social media platforms — such as images, videos, audio recordings, live-streamed performances and memes — as defined in Municipal Code of Chicago Section 4-156-1010. It does not include "bona fide" news sites or applications.

The SMAT "Rules of Interpretation" notably excludes from the definition of "social media business" sales of non-taxable services, as well as services subject to other Chicago taxes, including video streaming services, services provided by telecommunications carriers and cloud computing services such as software as a service as detailed below:

• Internet search or service providers
• Email services
• Streaming services, online video games, websites where the content is not user generated but includes interactive features such as chat, comments and review

Communication services (e.g., text, audio or video communication) provided by a business to its employees and clients for use in the course of business activities and not for public distribution

• Advertising networks that only deliver commercial content
• Telecommunications carriers
• Broadband services
• Single-purpose community groups for education or public safety
• Teleconferencing or video-conferencing services that allow real-time communications, unless the social media business's media access includes providing those services to consumers
• Cloud computing services or other nonpossessory computer leasing services (including cloud storage, shared document collaboration)
• Providing or obtaining technical support for a platform, product or service

The "Rules of Interpretation" also make clear that the article implementing the new tax "shall have no retroactive application."

A consumer is presumed to be a Chicago consumer if their information on record or available to a social media business indicates a Chicago home address, mailing address or internet protocol address or the primary usage location connected to the Chicago consumer is a Chicago location. The social media business bears the burden of proving such consumers are not Chicago consumers.

The social media business must report and remit the SMAT monthly on the 15th day of the month for the preceding month's reporting period. The due date for reporting and remitting the SMAT due for January 2026 is February 15, 2026; however, because February 15 falls on a Sunday and February 16 is a federal holiday, the due date is February 17, 2026.

Other key elements include:

• Chicago consumers will be counted only once in the month tax is imposed, with each calendar month being treated as a separate reporting period.
• Business entities that are part of a controlled group of corporations are treated as a single entity for purposes of meeting the definition of a social media business.
• A person that violates the social media amusement article may be subject to a fine ranging from $2,500 up to $10,000 for each offense. The fine will apply for each day the violation continues.

Implications

The definition of social media and the scope of the tax may leave businesses questioning whether offering free content or enabling users to access entertainment-related media could trigger tax obligations. Accordingly, businesses that fall within the definition of a social media provider — as well as those offering mixed services or products that include free social media content — should carefully evaluate the potential tax implications for their operations. While the intent of the SMAT is to capture revenue associated with taxpayers who are predominantly social media businesses, companies that are not necessarily social media businesses should evaluate their service offerings, particularly if they collect user information for the purpose of monetization as explained in the ordinance, and determine if any social media type activities it provides are significant.

The Chicago Department of Finance (Department) is in the process of developing additional guidance on the new SMAT. Taxpayers liable for the SMAT must register for this new tax (tax type ID 7510S), even if they are already registered to collect the city's amusement tax (tax type ID 7510) on streaming services and other amusements. Businesses that are not yet registered can find the appropriate tax registration and affidavit for initial tax period forms here.

Consideration should also be given to the following:

• The reliability and accuracy of user location details and the complexities involved in obtaining and maintaining IP location information if a user's address is not available
• The proper retention of documentation to support monthly tax calculations, so that there are no future issues with retrieving historical data
• The potential for double-counting of users with multiple accounts, as well as the possibility of missed reporting of Chicago users, may result in under/over reporting
• The language used in the ordinance was intended to allow taxpayers flexibility in determining which users are Chicago users for purposes of SMAT⁴; however the Department expects taxpayers to make good faith efforts to appropriately report the tax and may challenge the methodology used

Chicago joins other jurisdictions including Maryland and Washington in enacting taxes aimed at social media companies. Chicago's new tax differs from those in Maryland and Washington, however, in that it is only imposed on social media companies that meet a user threshold. Maryland's digital advertising tax is imposed on the annual gross revenue derived from digital advertising in the state, while Washington taxes sales of digital and nondigital advertising services. Jurisdictions that recently or are currently considering legislation that would tax social media companies or digital advertising services include, but are not limited to: California, Hawaii, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, Pennsylvania, Rhode Island and Tennessee.

Further, other Illinois local jurisdictions may consider imposing a tax similar to Chicago's SMAT, as several local jurisdictions followed Chicago by imposing an amusement tax on streaming services.