Maryland Court Strikes Down Digital Ad Tax, Casting Doubt on Utah's Similar Levy

The Maryland Tax Court declared the state's digital advertising tax unconstitutional, determining it breaches the Internet Tax Freedom Act as well as the Commerce and Due Process Clauses of the U.S. Constitution. The court dismissed Maryland's claim that the tax targeted only "programmatic" ads, focusing instead on the overall purpose of advertising rather than its delivery method. Utah's targeted-advertising tax, though avoiding the word "digital," similarly taxes only online ads and conditions liability on platforms earning at least $100 million worldwide, introducing extraterritorial elements.

Legal analysts contend that courts prioritize substance over terminology, making Utah's tax vulnerable to the same outcome. If upheld, the Maryland decision could require refunds of collected taxes and set a precedent that may invalidate similar levies in Illinois and other states. The analysis suggests defending Utah's tax would be costly and likely unsuccessful, questioning its economic justification.