Maryland Court Strikes Down Digital Ad Tax
Maryland Court Strikes Down Digital Ad TaxIn a written order issued on October 20, 2022, a Maryland circuit court granted summary judgment against the state of Maryland, ruling that the state’s Digital Advertising Gross Revenues Tax (Digital Ad Tax) is unconstitutional and violates the Internet Tax Freedom Act (ITFA), effectively striking down the tax. The judge’s decision was initially issued as a bench order after a two-hour hearing held on October 17, 2022. The written order states that the Digital Ad Tax violates the ITFA, the First Amendment, and the Commerce Clause.
The Maryland General Assembly overrode the governor’s veto in 2020, making Maryland the first state in the nation to impose a tax on digital advertising services. In 2021, the tax was amended to prohibit businesses from directly passing on the cost of the taxes to customers.
On October 20, 2022, the Comptroller of Maryland, Peter Franchot, issued a statement on the ruling urging Maryland to give up the fight for now:
"As Comptroller and the state’s chief fiscal officer, I firmly believe that instead of continuing to expend public resources to defend a law that was constitutionally questionable at the time of enactment, the incoming governor and the incoming legislature should instead be given the opportunity to revisit this law."