Decision cited Internet Tax Freedom Act and First Amendment
The Maryland Tax Court on Friday struck down the state’s first-in-the-nation tax on digital advertising and ordered state officials to repay the tax revenue already collected from Apple, Google, and Peacock TV. The ruling was issued from Annapolis.
The court found the law violated the federal Internet Tax Freedom Act, the First Amendment, and the commerce and due process clauses of the U.S. Constitution.
The decision ended a legal fight other states have been closely watching as they consider their own taxes on online advertising.
Maryland’s digital advertising tax was approved in 2021. State officials estimated the law could raise about $250 million a year to help pay for a sweeping K-12 education measure.
The tax applied to revenue large companies earned from digital advertisements shown in Maryland. Companies making more than $100 million in global annual gross revenues were taxed at a 2.5 percent rate.
The rate increased with company size, topping out at 10 percent for companies making $15 billion or more in global gross annual revenues.
The court ordered refunds to Apple, Google, and Peacock TV.