Maryland tax court nullifies pioneering digital ad levy, mandates refunds to major tech firms

Maryland's tax court declared the state's first-of-its-kind digital advertising tax invalid, citing conflicts with the Internet Tax Freedom Act and several constitutional provisions. The tax, enacted in 2021, was projected to raise about $250 million each year to fund a broad K-12 education initiative. In its ruling, the court ordered the state to return taxes already collected from Apple, Google and Peacock TV.

Lawmakers Bill Ferguson and Joseline Pena-Melnyk expressed disagreement and pledged to keep pursuing the matter through the courts. The court emphasized that interstate commerce regulation belongs to Congress and that the tax's reliance on global revenue was improper. A prior decision by the 4th U.S. Circuit Court of Appeals had already flagged the tax's restriction on companies' ability to inform customers about the levy as a free-speech violation.