UPDATED - The Libertas Review - February Edition - Maryland's Digital Advertising Tax
On October 17, 2022 a Maryland judge ruled the state’s digital ad tax unconstitutional. Judge Alison Asti found that the Digital Advertisement Gross Revenues Tax (DAGRT) had many issues, including the tax breaching the Internet Tax Freedom Act (ITFA), the U.S. Constitution’s Commerce Clause, and the First Amendment.
Regular advertising is not taxed in Maryland, but digital advertising is taxed under the DAGRT. This inequality led Judge Asti to deem the tax discriminatory based on the ITFA. The tax also violates the U.S. Constitution’s Commerce Clause due to the tax rate being based on not only digital advertising, but on income from all global sales. Additionally, the tax infringes on the First Amendment through the tax’s singling-out of news media.
“While the enactment of this law was well-intentioned...its constitutionality – coupled with the tax’s residual impact on small businesses that utilize digital advertising services – continue to give me pause on the prudence of this law.”
Original Review
In February 2021, after House and Senate Bill amendments, and a veto by Governor Larry Hogan that was overridden, Maryland passed the nation’s first law subjecting digital advertising revenues to a gross receipts tax.