Judge Blocks First US Tax on Digital Advertising

Maryland law also is being opposed in federal court
By Newser Editors and Wire Services
Posted Oct 17, 2022 7:15 PM CDT
Judge Blocks First US Tax on Digital Advertising
This photo combo of images shows the Amazon, Google, and Facebook logos.   (AP Photo, file)

The nation's first tax on digital advertising was struck down as unconstitutional by a Maryland judge on Monday. It's a law that attorneys for Big Tech have contended unfairly targets companies like Facebook, Google, and Amazon in a separate federal case against the same law, the AP reports. Judge Alison Asti of Anne Arundel County Circuit Court said the Maryland law violates the US Constitution's prohibition on state interference with interstate commerce. She also ruled that it violates the federal Internet Tax Freedom Act, which prohibits discrimination against electronic commerce.

The state estimated the tax on digital advertising could raise about $250 million a year to help pay for a sweeping K-12 education measure to expand early childhood education, increase teacher salaries, boost college and career readiness, and help struggling schools. Raquel Coombs, a spokesperson for Maryland Attorney General Brian Frosh, said his office is reviewing the decision to determine next steps. Comptroller Peter Franchot's office also is reviewing the decision, said spokesperson Susan O'Brien. Verizon Media Inc. and Comcast challenged the law in the state's court. The law also is being challenged in federal court by the US Chamber of Commerce. Oral arguments in that case are scheduled for Nov. 29.

The Maryland law's fate is being closely watched by other states that have weighed a similar tax. The law was enacted last year by the Maryland General Assembly, which is controlled by Democrats, over the veto of Republican Gov. Larry Hogan. The law would have taxed revenue that the affected companies make on digital advertisements shown in the state. The tax rate would have been 2.5% for businesses making more than $100 million in global gross annual revenue; 5% for companies making $1 billion or more; 7.5% for companies making $5 billion or more; and 10% for companies making $15 billion or more. GOP lawmakers cheered the judge's ruling as "a huge win for Maryland's small businesses who rely on affordable digital advertising to market their services."

(More online advertising stories.)

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