Maryland digital advertising tax struck down by court

The Maryland Tax Court has struck down the state’s digital advertising tax, ruling that it violates the federal Internet Tax Freedom Act. The decision follows legal challenges from Apple, Google, and Peacock TV. The court determined that the tax is indistinguishable from non-digital advertising services and that the state failed to impose comparable taxes on non-digital advertising, thereby violating federal law and the dormant Commerce Clause.

Enacted in 2021, the tax applied to companies with more than $100 million in annual global revenue, with rates between 2.5% and 10%. The revenue was specifically earmarked for the Blueprint for Maryland’s Future, an education funding plan. The ruling orders the state to refund collected taxes plus interest.

Maryland Comptroller Brooke Lierman expressed disagreement with the decision and indicated a potential appeal, stating the law ensures large tech companies pay their fair share to support public school systems. The ruling poses a significant financial challenge to the Blueprint program, which relies on these funds to manage growing costs and structural budget pressures.