BALTIMORE — Maryland’s Tax Court today struck down the state’s Digital Advertising Gross Revenues Tax, ruling that the law is unlawful and unconstitutional.
“When the Maryland General Assembly was considering this tax, we told them it was unlawful and unconstitutional — and they passed it anyway,” said Steve DelBianco, President and CEO of NetChoice.
“Now the state has to return the taxes it collected, forcing Maryland taxpayers to pay the cost of their lawmakers’ mistake. Any state tempted to try the same should understand passing an unconstitutional tax will leave a state’s finances worse off.”
The court found that the tax conflicts with the federal Internet Tax Freedom Act (ITFA), which bars states from imposing discriminatory taxes on electronic commerce, and that it is unconstitutional under both the dormant Commerce Clause and the First Amendment because of its discriminatory design. As a result of today’s ruling, Maryland has been ordered to repay the tax it collected, with interest, to the businesses that paid it.
In a related challenge brought by Peacock, the court separately held that the tax violates the First Amendment because it discriminates against certain broadcasters — reinforcing the broader finding that the law singles out digital services and digital speakers for disfavored treatment.
NetChoice has fought this law from its inception, arguing that a tax targeting only digital advertising was both discriminatory and unconstitutional. NetChoice, alongside the U.S. Chamber of Commerce and the Computer & Communications Industry Association (CCIA), also prevailed last year in a legal challenge to the law’s “pass-through” provision, which had prevented businesses from telling customers how the tax affected their advertising prices.
Maryland enacted the Digital Advertising Gross Revenues Tax in 2021 over a gubernatorial veto, making it the first state in the nation to impose a tax specifically on digital advertising revenue. The law has faced continuous legal challenges since its passage, including previous rulings finding constitutional and statutory defects in the tax and in provisions restricting companies from disclosing its cost to customers.
Read the tax court’s decisions here for Apple, Google, and Peacock.
For more information on NetChoice’s original challenge to the law, you can read the Fourth Circuit’s decision here.
Please contact press@netchoice.org with inquiries.