MARYLAND (WBFF) — The Maryland Tax Court has struck down the state’s Digital Ad Tax, ruling that it violates the federal Internet Tax Freedom Act.
The decision was issued Friday morning and stemmed from three challenges to the tax brought by Apple, Google and Peacock TV.
In its decision, the court ordered the state to refund the taxes collected along with interest.
The digital ad tax faced various challenges in state and federal courts since its enactment.
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Last year, a federal appeals court struck down parts of the law for violating the First Amendment.
Doug Mayer, president of Americans for Digital Opportunity, praised the ruling, saying, “Today’s ruling validates what every person with the most basic understanding of tax law has been saying for over six years – digital advertising taxes are illegal on multiple levels. If elected officials really want to increase revenue they should be empowering entrepreneurs not concocting illegal taxes that stifle what is powering so much of the American economy.”
Senate Minority Leader Steve Hershey stated that the ruling confirms the warnings Republicans have issued since the tax was first proposed.
“Senate Republicans warned from day one that Maryland’s first-in-the-nation digital advertising tax was unconstitutional. We said it when the bill passed, we said it when Governor Hogan vetoed it, and we said it again when Democrats overrode that veto. Today, the court confirmed what we warned them about all along,” Hershey said.
Enacted in 2021, the law targets large tech companies with global revenues of at least $100 million, increasing tax rates by 2.5% increments up to a maximum of 10% for those with over $15 billion in revenue.
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Maryland was expected to collect as much as $250 million annually from the tax, with the revenue earmarked for the Blueprint for Maryland’s Future.
In October, the comptroller’s office announced the collection of over $400 million in taxes.
Money collected from the tax was intended to help offset the costs of the Blueprint for Maryland’s Future.
The costs associated with the program are contributing to Maryland’s projected multibillion-dollar structural budget gaps.
The Comptroller’s Office spokesperson said Friday that it is reviewing the ruling.
This story was contributed by Maryland Matters.
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