Maryland Tax Court Scraps Digital Ad Tax, Orders Refunds

A Maryland state tax court has struck down the state's first-in-the-nation tax on digital advertising, ruling it unconstitutional and ordering refunds to tech giants Apple, Google, and Peacock TV. The tax was approved in 2021 and estimated to raise $250 million a year for K-12 education. However, attorneys representing Big Tech companies challenged the law, arguing that it unfairly targeted them and restricted their right to free speech.

The court found that the tax violated the federal Internet Tax Freedom Act and the First Amendment, as well as the commerce and due process clauses of the U.S. Constitution. The tax court said Congress is tasked with regulating interstate commerce, not state legislatures, and that the tax law was inappropriately based on global revenue rather than in-state advertising.

The ruling has implications for other states considering taxes on online ads. Maryland Senate President Bill Ferguson and House Speaker Joseline Pena-Melnyk expressed 'respectful disagreement' with the decision, stating they will continue working with the Attorney General and Comptroller as this matter proceeds through the courts.