Tax Law Blog

Maryland’s Digital Ad Tax: The Next Frontier in State and Local Taxation

On Friday February 12, the Maryland State Senate voted to override Maryland’s governor to pass a bill creating a tax on annual gross revenues derived from digital advertising services in Maryland. Maryland’s digital advertising tax is the first of its kind in the United States.

While this is a new development and has already been challenged through litigation filed by multiple groups, it continues the post-Wayfair trend of expanding the scope of taxable activities and accounting for modern innovation. In 2018, the United States Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can require businesses without a physical presence to collect and remit sales tax if the business has more than 200 transactions or $100,000 in in-state sales.

Maryland is not the only state that is considering expanding its tax laws. Legislatures in New York, Montana, and Connecticut have introduced legislation similar to Maryland’s digital advertising tax, while New York, Oregon, and Washington have proposed to tax the sale or monetization of personal data. Additionally, Connecticut and Indiana legislatures have submitted bills that would tax social media companies specifically.

For more details and other perspectives on this recent development, visit the following articles:

• Maryland Approves Country's First Tax on Big Tech's Ad Revenue
• Maryland's Digital Advertising Tax is Unworkably Vague
• Senators Want to Tax Digital Ads to Fund School Reforms

We anticipate additional developments in this area, and we are continuing to track the effect of Maryland’s digital advertising tax and other state and local tax developments. If you have further questions about how these developments may affect you or your organization, contact Taylor Gast or another member of Foster Swift’s tax practice group.

Categories: Sales Tax, Tax, Tax Disputes