A Maryland tax court ruling on the Maryland tax court digital ad tax dispute has struck down the state's pioneering levy on digital advertising, ordering…
A Maryland tax court ruling on the Maryland tax court digital ad tax dispute has struck down the state's pioneering levy on digital advertising, ordering officials to refund money already collected from Apple, Google and Peacock TV.
What the Maryland Tax Court Found
The Maryland Tax Court concluded the tax runs afoul of the federal Internet Tax Freedom Act, along with the First Amendment and the commerce and due process clauses of the U.S. Constitution. Judges pointed out that regulating interstate commerce falls to Congress, not a state legislature, and that basing the tax on companies' global revenue rather than their in state advertising activity overstepped that line.
The court also found little practical difference between digital ads and older formats like print or billboards. Since those traditional ad types go untaxed, the federal law barring discriminatory taxation of e-commerce applies here too, at least under the current record.
How the Tax Was Structured
Approved in 2021, the law applied to companies pulling in more than $100 million in global annual gross revenue. Those firms faced a 2.5 percent tax on Maryland digital ad revenue, with rates climbing as company revenue grew.
| Global annual gross revenue | Tax rate on digital ad revenue |
|---|---|
| Over $100 million | 2.5% |
| $15 billion or more | 10% |
State estimates pegged potential annual revenue at around $250 million, money lawmakers earmarked for a broad K-12 education overhaul.
The Legal Battles Leading Up to This Ruling
Big Tech firms, including Meta and Amazon, fought the measure in several courts, arguing they had been singled out unfairly. Last year, the 4th U.S. Circuit Court of Appeals already sided against part of the law, ruling that a provision barring companies from telling customers about the tax violated free speech rights. Judge Julius Richardson wrote that opinion.
Reaction From Maryland Lawmakers
Senate President Bill Ferguson and House Speaker Joseline Pena Melnyk, both Democrats, said in a joint statement that they