The Maryland General Assembly is reportedly working to override Gov. Larry Hogan’s veto this past summer of a controversial proposal to tax digital advertising revenues.
To help pay for a plan to revamp Maryland public schools, Democratic state legislators came up with the proposal at the beginning of the year to levy as much as a 10 percent excise tax on revenue companies receive from selling digital ads that target Maryland IP addresses. Business groups strongly opposed the proposed ad tax, citing free speech concerns and the negative impact the tax would have on businesses hard hit by the ongoing pandemic and on news organizations that rely heavily on revenue from digital ads.
In May, Hogan vetoed the proposed ad tax, which he said was “misguided” and would likely be passed along to Maryland consumers. Business groups are already preparing to oppose the Maryland legislature’s continued attempts to push through a measure they say would violate the Internet Tax Freedom Act Preemption Act as well as interstate and foreign commerce laws.
“We are hearing that the Maryland legislature will be making a serious effort to overcome Governor Hogan’s veto of the digital ad tax proposal,” said Dan Jaffe, Group Executive Vice President of the Association of National Advertisers. “To do so, both houses of the Maryland legislature will need a 3/5th vote of each chamber. The legislation, which places up to a 10% tax on specified digital advertising in the state, would violate federal law on discriminatory taxes on digital media and contravene the Commerce clause. The business community needs to make a major effort to oppose this misguided and counterproductive proposal.”
ANA is part of an Ad Tax Coalition that includes ASAE, the National Association of Broadcasters, Internet Association and others that successfully opposed a similar advertising tax proposal considered by the DC Council over the summer. The DC proposal, initially offered as part of the city’s Fiscal Year 2021 budget, would have defined advertising services as “the planning, creating, placing or display of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography, and production supervision.” After hearing from the DC business community, DC Council Chairman Phil Mendelson reversed course in late July and withdrew the proposed ad tax.