Maryland Tax Court Voids Digital Ad Tax, Orders Refunds

A Maryland state tax court has ruled against the state's digital advertising tax, deeming it unconstitutional. The tax was approved in 2021 and estimated to raise around $250 million per year for K-12 education. However, the tax court found that the law violates the federal Internet Tax Freedom Act as well as the First Amendment and the commerce and due process clauses of the U.S. Constitution.

The tax targeted large companies making more than $100 million in global annual gross revenues, taxing them at a 2.5% rate. The rate increased for companies with larger revenues, topping out at a 10% rate for those making $15 billion or more in global gross annual revenues.

Apple, Google, and Peacock TV were ordered to receive refunds of the tax money already collected by the state. Supporters of the law argued that it was necessary to overhaul Maryland's tax methods in response to changes in how businesses advertise.

However, attorneys representing Big Tech companies challenged the law, arguing that they were unfairly targeted and that the tax violated their right to free speech. Judge Julius Richardson ruled last year that part of the law violated the Constitution because it blocked Big Tech companies from telling customers about the tax.