The Maryland Digital Ad tax, the first in the nation, was struck down in October by an Anne Arundel Court after less than two years of being in practice. The judge sided with Comcast & Verizon in their case, finding that the policy violated the First Amendment, the Internet Tax Freedom Act, and the Dormant Commerce Clause. Because the law targeted digital advertising only, the judge ruled that the tax discriminated against e-commerce which violated the Internet Tax Freedom Act.
In February 2021, Maryland lawmakers voted to override Governor Larry Hogan’s veto of the digital ad tax. It was the nation’s first tax on the revenue from digital advertisements sold by platforms like Facebook, Google, and Amazon. The tax applied to digital ad revenue attributed to ads displayed inside the state.
- Platforms earning between $100 million and $1 billion a year would face a 2.5% tax
- Platforms earning over $15 billion a year would pay a 10% tax
There were numerous lawsuits immediately filed to strike down the law in the state. Although, even with this “win,” the Maryland Comptroller could appeal the decision to the Maryland Court of Appeals.
For supporters of the tax, Maryland’s enactment would have been a roadmap for the rest of the county. However, digital advertising is a complex landscape and often outside the understanding of law makers. Maryland’s attempt may now become a road map on how not to approach a similar tax in other states.
As experts in the advertising space (and as a small business), the latest decision in this ongoing saga is welcome news. The tax could potentially add pressure to advertisers’ budgets and bottom lines, especially as we head into a likely recession.
This blog post was written by Vice President, Beth Cyphers.