Tax & Accounting News
Judge Nixes America's First Digital Ad Tax, Sets Precedent
This week, a Maryland judge nixed the United States' first digital ad tax, setting a precedent that will impact all digital advertisers moving forward.
In a case filed by telecommunication giants Verizon Media and Comcast, Anne Arundel County Circuit Judge Alison Ali ruled that the state tax on online advertisements is, in fact, unconstitutional and a violation of existing federal law.
The tax was instated in 2021, levying a tax of 2.5% to 10%, on large corporations, including Google and Facebook, that advertise their products and services online.
Ali determined that, due to the fact that the policy only taxed digital ads, it violated the Dormant Commerce Clause. This regulation prohibits individual states from restricting interstate commerce. The judge determined that Maryland's law violated the Permanent Internet Tax Freedom Act, which bans discriminatory taxes on e-commerce and taxes on internet access.
DCist reached out to the Maryland Office of the Attorney General, who shared that, "Our office is reviewing the decision to determine next steps."
Attorney General Brian Frosh (D) has not personally commented at this time.
It is worth noting that this case is likely far from over. The U.S. Chamber of Commerce and an organization representing Facebook, Amazon, and Google's parent company, Alphabet, have also filed a federal case regarding the tax. Oral arguments are slated for November.
What do you think? Should Maryland's online ad tax be legal?
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