The House Finance Committee approved legislation Wednesday to levy a state tax on digital ads by businesses on the internet.

The committee voted 14-12 along party lines for House Bill 1678 sponsored by Rep. Elizabeth Fielder, D-Philadelphia. Democrats supported and Republicans opposed HB1678.

The committee vote came as state lawmakers start the budget season which often includes a search for new state revenue.

HB1678 imposes a 5% state tax on the gross revenue from digital ads on internet sites, search engines and screen pop ups.

HB1678 exempts ads on broadcast and news media web sites.

Committee Majority Steve Samuelson, D-Northampton, said HB1678 modernizes a tax dating to the 1860s.

Samuelson said a report by a major audit firm shows total corporate revenue from digital ads reached an estimated $294 billion in 2025. Estimated revenue if a state digital ad tax is enacted would be in the annual $500 million range, he added. House panel OKs digital ad tax

The House Finance Committee Wednesday approved legislation taxing businesses for ads they post on the internet.

State Rep. Aerion Abney, D-Philadelphia, said large corporations like Meta and Amazon collect private data to sell ads to consumers and maximize profits.

State Rep. Leslie Rossi, R-Westmoreland, said small businesses that advertise in rural areas could be hurt by the tax. She said there are problems in the three states that have legalized a digital ad tax.

Committee Minority Chair Keith Greiner, R-Lancaster, said Washington is likely to set policy to preempt an internet tax.