Technology Industry Groups File Lawsuit Targeting Maryland Digital Ad Tax

A coalition of technology stakeholder associations that include the Computer & Communications Industry Association (CCIA), along with the U.S. Chamber of Commerce and the Internet Association, are suing Maryland Comptroller Peter Franchot (D), over the state’s recent enactment of the state’s online advertising tax; a first in the nation law. We previously wrote a blog post on this tax.

 According to the lawsuit, the plaintiffs “seek a declaration and injunction against enforcement of Maryland House Bill 732 (the Act) insofar as it imposes a “Digital Advertising Gross Revenues Tax” on sellers of digital advertising services. The Act is a punitive assault on digital, but not print, advertising. It is illegal in myriad ways and should be declared unlawful and enjoined.

 Additionally plaintiffs argue “The premise of the law is deeply flawed. Taxing digital advertising revenue will have the opposite of the Act’s intended effect, reducing resources to support the creation and availability of high-quality ad-supported content, leaving the online field overrun by low-quality “junk” content. Meanwhile, the Act will raise costs for consumers and make it more difficult for businesses to connect with potential customers. Simply put, the Act will harm Marylanders and small businesses and reduce the overall quality of internet content—all while doing nothing to stave off the dissemination of misinformation and hate speech.”

We’ll continue to monitor these events as it is almost a certainty that other states will attempt to pass similar legislation. Technology stakeholders including those in digital commerce will continue to be at risk. We at Lanton Law can help. Our legal and policy tools can help offer your organization a clear path forward to navigate what will be changing policies for technology stakeholders. Contact us today to discuss your options.

Maryland One Step Closer to Implementing a Digital Ad Tax

For a while we have seen the European Union (EU) grapple with the development of digital ad taxes which have had a significant impact on U.S. Big Tech companies. Now, Maryland is showing similar regulatory oversight on digital ads as the EU. 

Last year HB 732 was passed which would have imposed a graduated tax on the annual gross revenue derived from digital advertising in Maryland. The graduated tax would be: 

• For persons with global annual gross revenues of $100 million through $1 billion, the rate would be 2.5% of the assessable base.

• For persons with global annual gross revenues of more than $1 billion through $5 billion, the rate would be 5% of the assessable base.

• For persons with global annual gross revenues of more than $5 billion through $15 billion, the rate would be 7.5% of the assessable base.

• For persons with global annual gross revenues exceeding $15 billion, the rate would be 10% of the assessable base.

Last year Maryland Governor Hogan vetoed the bill stating “These misguided bills would raise taxes and fees on Marylanders at a time when many are already out of work and financially struggling. With our state in the midst of a global pandemic and economic crash, and just beginning on our road to recovery, it would be unconscionable to raise taxes and fees now.” 

Besides looking at this from a political lens of whether technology companies are regulating content speech and whether Section 230 should be revisited, there is also an economic lens. The pandemic has caused people to migrate from physical office space to digital commerce platforms, meaning that states are now grappling with the virus and shrinking taxable income. 

As far as Maryland goes the House of Delegates has voted to override the Governor’s veto of HB 732. The next step is for the Senate to override the legislation to implement it. The problem is there will be legal challenges to this law.  

Additionally, we believe that this is not the last time that we’ll see legislation like this. Similar efforts in New York and West Virginia have failed while Connecticut, Indiana have been the latest to introduce similar legislation. 

Technology stakeholders including those in digital commerce will continue to be at risk. We at Lanton Law can help. Our legal and policy tools can help offer your organization a clear path forward to navigate what will be changing policies for technology stakeholders. Contact us today to discuss your options.