US tech giants Meta X and LinkedIn have formally appealed against a groundbreaking VAT claim by Italy, setting the stage for what could become a defining legal battle over how digital services are taxed across the European Union.

The Reuters report, citing four sources with direct knowledge of the matter, highlighted that the companies filed their appeals with Italy’s first-instance tax court in mid-July after failing to reach a settlement with Italian tax authorities. The case is notable not only for its scale but also because it represents the first instance in which Italy has taken Big Tech to full trial proceedings, diverging from previous negotiations that typically concluded with settlements.

At the heart of the dispute lies Italy’s novel interpretation of value-added tax (VAT) rules. Authorities argue that the act of users registering for free access to platforms like Facebook, Instagram, X and LinkedIn should be considered taxable. The rationale is that in exchange for a membership account, users provide personal data, effectively constituting a transaction with economic value.

Should the Italian courts uphold this interpretation, it could have sweeping implications for companies far beyond social media, potentially including airlines, retailers, publishers, and any other business that offers digital access in exchange for user data or profiling consent.

The Italian Revenue Agency is seeking €887.6 million from Meta, €12.5 million from X, and approximately €140 million from LinkedIn. These claims were issued in March, with the companies’ response deadline passing in mid-July, prompting the formal appeals.

Meta said in a statement to Reuters that it had “cooperated fully with the authorities” but “strongly disagrees with the idea that providing access to online platforms to users should be subject to VAT”. LinkedIn said it had “nothing to share at this time”, while X has not responded to requests for comment.

Notably, the report also revealed that Italy is preparing to request an advisory opinion from the European Commission. Questions are expected to be formally submitted by the Economy Ministry to the EU’s VAT Committee, an independent, non-binding advisory body, by early November. A response could be forthcoming by spring 2026.

Though non-binding, a negative opinion from the committee could lead Italy to abandon the VAT claim and suspend related criminal investigations, insiders suggest.

Legal experts warn that the implications of Italy’s approach, if endorsed, could ripple across the 27-nation EU, where VAT rules are broadly harmonized. “It could rewrite the rulebook on what constitutes a taxable transaction in the digital economy,” one tax adviser said.

The broader dispute comes amid persistent tensions between US tech companies and European regulators. Earlier this month, Reuters reported that Meta will not adjust its controversial “pay-or-consent” data model, despite growing scrutiny from Brussels. Separately, the Financial Times revealed the European Commission has paused one of its probes into Elon Musk’s platform X, reportedly in an effort to preserve momentum in ongoing transatlantic trade talks.

(With inputs from Reuters)