The plan unleashes a tax compliance nightmare.

While there have been many proposals for a robot tax, few of those proposals include any specifics about how such a tax would be implemented or administered. Put bluntly, “[t]he enthusiasm of robot tax proponents is matched by the lack of detail on how such a tax would work.”47 There is good reason for this omission: while broad policy statements about taxing robots is easy, addressing the many practical challenges of such taxes is much more difficult. As Professor Mazur has put it, “these proposals involve substantial elements of arbitrariness and complexity in implementation, likely increasing compliance and administrative burdens on companies and tax authorities.”48 The most significant hurdles are discussed below.

A. What is a Robot?

There is a fundamental definitional problem plaguing robot tax proposals: what is a taxable robot?49 “Few complex technologies have a single, stable, uncontested definition. Robots are no exception.”50 This is a significant problem for dealing with robots in a legal context and not unique to tax.51 To be sure, there are various technical definitions that attempt to define what a robot is.52 While the details vary, the “common thread is that they tend to focus on the autonomy and decision-making process of robots.”53 These technical definitions, while they may be useful in a scientific context, would do little to assist a lay judge or tax administrator without a technical background. The European Union tried its hand at determining a “common definition of smart autonomous robots” to include the following characteristics: “acquires autonomy through sensors and/or by exchanging data with its environment (inter-connectivity) and trades and analyses data; is self-learning (optional criterion); has a physical support; [and] adapts its behaviours and actions to its environment.”54 Despite this attempt, the EU recognized that “defining robots is no easy task in the absence of any real consensus within the global scientific community.”55 In sum, there simply is no commonly-accepted legal definition of a “robot.”56

The definitional problem is simply one manifestation of the difficulty judges (and by extension, tax authorities, taxpayers, and tax professionals) have in dealing with inanimate objects that exhibit features of autonomy that we commonly associate with robots. A bizarre example of the gymnastics required to address the tax implications of robots comes from, of all places, Chuck E. Cheese.57 At the time, Maryland gave its counties the authority to impose an admissions and amusement tax on the gross receipts of entities providing “refreshment, service or merchandise at any roof garden, cabaret or similar place where there is furnished a performance.”58 Chuck E. Cheese is a “family dining and entertainment center” including , among other amusements, an animatronic Chuck E. Cheese, an “iconic, energetic mouse mascot, performs music and entertainment shows along with his friends, providing free entertainment to our guests and driving strong brand recognition.” 59 The Maryland Comptroller of Treasury assessed this tax against the owner of three Chuck E. Cheese restaurants in the state, alleging that the performance of Chuck E. Cheese and his animatronic friends constituted a performance for purposes of the admissions and amusement tax statute. The Maryland Court of Special Appeals disagreed, based on its interpretation of the term “performance:”

According to Webster's New Universal Unabridged Dictionary (2d edition, 1983), one definition of the word “performance,” among others clearly less applicable, is “(4) a formal exhibition of skill or talent as a play, musical program, etc.; a show.” We recognize that “performance,” as used in § 402(a), has connotations of inherent human input that leaves room for spontaneous imperfections during the exhibition of skill or talent. A “performance” is a method to measure human skill or talent. In other words, a pre-programmed robot can perform a menial task but, because a pre-programmed robot has no “skill” and therefore leaves no room for spontaneous human flaw in an exhibition, it cannot “perform” a piece of music anymore than can a jukebox. Just as a wind-up toy does not perform for purposes of § 402(a), neither does a preprogrammed mechanical robot.

Appellees' mechanical puppets are designed to give the impression that they are performing; however, because there is no human skill necessary in their control, there is no “performance.”60

If you accept that Chuck E. Cheese and friends are little more than glorified jukeboxes, then this decision seems reasonable. Yet, robots and AI are capable of much more sophisticated tasks than replaying canned tunes for pizza-fueled children’s birthday parties. As Professor Calo points out, robots increasingly engage in emergent behavior that displays the “ability or tendency of a system to behave in complex, unanticipated ways.61 Would the result be different if the cybernetic mouse could compose its own music, choose what songs to perform and reflect a unique style in performing it? It is not at all clear that judges will have the technical knowledge to make the distinction between a simple machine and an emergentbehavior robot.62 Even if they did, it is unlikely that a bright-line rule could separate robots from mere machines. Resolving that question would therefore revolve around the facts and circumstances of each particular case. There is no reason to expect tax authorities, taxpayers, or tax professionals to have better luck managing that difficult task.63

So, when discussing a robot tax, does a “robot” refer to any labor-saving machine (say, an ATM), or something more complex? What degree of autonomy (or emergent behavior, if you prefer) must it exhibit? Does it include an intangible algorithm embedded in code, or must it be a physical actor? Does it include a machine that enhances rather than replaces human activity?64 Any robot tax must answer these questions, and reduce that language to statutory text. From a practitioner’s standpoint, the difficulty in nailing down such a basic element creates compliance nightmares and planning opportunities, and is not a sound basis for an administrable tax.