Maryland Legislature Passes First In The Nation Digital Ad Tax – ANA Calls for Veto

Today, the Maryland Legislature passed the first digital ad tax bill ever put forward by any state in the nation. The bill, HB 732, violates federal statutes, is highly likely to be unconstitutional, and is extremely counterproductive.

This proposal violates the federal Permanent Internet Tax Freedom Act (47 U.S.C. 151, note) which prohibits additional taxes or an alternative tax rate on a good, service, or information delivered electronically that differs from the tax or rate applied to the same, or similar, good, service, or information when purchased by “traditional” means. Furthermore, the proposal is likely to be unconstitutional, violating both the First Amendment and the “Dormant” Commerce Clause.

Finally, this digital ad tax is fundamentally bad policy. At a time when businesses are struggling due to the enormous impact of the COVID-19 pandemic, it is extremely counterproductive to burden the selling effort. Digital advertising is a major driver of jobs and economic activity in Maryland and should not be hobbled in carrying out these important functions.

While we strongly support finding adequate funding for education in Maryland, this tax certainly is not the way to do so. We will be calling on the Governor to veto this misguided proposal.