In furtherance of Libertas’ previous blogs regarding Maryland’s digital advertising tax (DAT), Lisa A Civitella JD CMI and Olivia Archer authored a recently published article in the Journal of State Taxation, Summer 2022 Edition that addresses some of the relevant legislative and judicial issues surrounding our country’s first digital advertising tax.
“...Civitella provides a look at Maryland’s controversial and infamous digital advertising tax...”
DAT & the constitution
The issues with the broad definitions in Maryland’s statute, the apportionment formula and geosourcing concerns quickly escalated once the law was passed.
On February 18, 2021, one week after HB 732 became law, a civil case was filed against Peter Franchot, the Comptroller of Maryland, in the US District Court by the US Chamber of Commerce and three major technology trade associations: The Internet Association, NetChoice and the Computer & Communications Industry Association.
The plaintiffs asserted that the Act may potentially harm “Marylanders and small businesses and reduce the overall quality of Internet content - all while doing nothing to stave off the dissemination of misinformation and hate speech.”
New Tax Era
The first of any new type of tax will inevitably face challenges and criticisms. Although MD has successfully enacted the first DAT in the US, the ultimate success of this type of tax has yet to be determined.
Perhaps the tax will pave the way for a new method of taxation in a digitally driven era or perhaps it will become a lesson in violating constitutional rights. Regardless of whether MD’s DAT laws as written are an ultimate success or failure, a digital advertising tax appears to be a type of tax that has a prospective application and will evolve.