State legislators in Maryland approved legislation this week making substantive changes to a first-in-the-nation tax on digital advertising, though business groups still strongly oppose the bill.
The bill passed by the state Senate on Monday delays the tax’s effective date from Jan. 1, 2021 to Jan. 1, 2022, creates an exemption for broadcasters and news media, and prohibits tech companies from passing the tax on to users. Following passage, the Maryland comptroller’s office issued a bulletin clarifying that the first quarterly estimated tax payment is due April 15, 2022 on first quarter 2022 digital advertising revenues.
Last spring, Maryland Governor Larry Hogan vetoed the proposed ad tax, which he said was “misguided” and would likely be passed along to Maryland consumers. It’s unclear whether Hogan will veto the amended legislation or let it take effect.
A coalition of trade associations sued the state in February, filed a lawsuit, arguing that Maryland’s tax is unfair because it targets only online advertising, not ads that appear in print or on television. Opponents also said the tax would violate the federal Permanent Internet Tax Freedom Act which prohibits states from enacting “discriminatory taxes on electronic commerce.”
While this legal battle plays out, roughly a dozen other states – including New York, Massachusetts, Indiana and Washington – are considering ways to tax tech companies and other businesses that advertise online and engage in consumer data collection. New York lawmakers are taking a different approach to the same goal, proposing an excise tax on the sale of personal information businesses collect from any state resident who visits their websites. This proposed bill would impact not just big tech companies but virtually any retailer that has a rewards program or otherwise keeps track of consumer preferences.