Maryland Tax Court Voids Digital Ad Tax

A Maryland state tax court has struck down the state's first-in-the-nation digital advertising tax and ordered refunds to Apple, Google, and Peacock TV. The law taxed revenue from digital ads shown in Maryland at a rate of up to 10% for companies with global annual revenues above $15 billion.

The tax was approved in 2021 as part of a sweeping K-12 education measure, which aimed to raise about $250 million per year. However, the tax court ruled that it violates 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 decision was based on the fact that Congress regulates interstate commerce, not state legislatures. The court also found that there is no significant difference between digital advertising and print or billboard ads, which means the bar on taxation applies.