First-In-The-Nation Digital Ad Tax Struck Down By Maryland Judge

The first-in-the-nation digital advertising tax in Maryland is no more after less than two years in practice. The tax was struck down in the Anne Arundel County Circuit Court after Judge Alison Asti sided with subsidiaries of Comcast and Verizon, finding that the policy violated the First Amendment, the Internet Tax Freedom Act, and the Dormant Commerce Clause. By only taxing advertising when it is served digitally, the tax discriminated against e-commerce and violated the federal Internet Tax Freedom Act, Judge Asti said. He also ruled the tax violated the Dormant Commerce Clause—which prohibits states from passing legislation that discriminates against interstate commerce—as it makes little effort to apportion the tax based on in-state activity. First enacted in 2021, the policy levied a tax of between 2.5% and 10% on large companies like Facebook and Google that sell online advertisements. Proponents of the bill argued that it was a necessary move to help modernize the state’s tax code. Opponents, including Governor Larry Hogan (R-MD), said it would only cost local businesses more money in the long run.