A Maryland state tax court has effectively ended the state’s effort to tax digital advertising. This ruling declares the law unconstitutional and requires the state to refund tax payments already collected from companies such as Google, Apple, and Peacock TV.
The court determined that the legislation violates the federal Internet Tax Freedom Act. The judge highlighted that the tax improperly distinguished between digital ads and traditional media like billboards or print, which do not face similar levies. Furthermore, the court emphasized that regulating interstate commerce falls under the authority of Congress rather than individual state legislatures.
Maryland originally passed the tax in 2021 with the goal of generating roughly $250 million annually to fund K-12 education initiatives. The law targeted large technology firms, applying a rate of 2.5% to 10% based on global gross annual revenue. Critics and legal representatives for major platforms argued that the tax was discriminatory and targeted specific businesses unfairly.
While state officials in Maryland expressed disagreement with the court’s decision and indicated that the legal process will likely move forward, the immediate impact is a significant setback for the state’s fiscal plans. Other states watching this case for their own potential tax policies now face a clear legal warning regarding the limits of taxing digital commerce.