After hearing oral arguments in a federal challenge of the state’s first-in-the-nation digital advertising tax, the Maryland Circuit Court of Anne Arundel County granted summary judgement to the taxpayers in a ruling1 from the bench that the law was unconstitutional and violated the Internet Tax Freedom Act (ITFA) and the First Amendment.
Both sides provided arguments in a hearing before Judge Alison Asti to determine whether the law is a tax or an unconstitutional penalty that targets big tech. The state argued that the law was a legitimate education revenue raiser, as approved by the Legislature. The law is described by supporters as a necessary step to modernize the state’s tax system, benefitting the entire public. Lawyers for the plaintiffs challenged the punitive, burdensome, and directed nature of the law, which was revised after enactment to exclude broadcasting companies and news media from the tax.
In her ruling, Judge Asti referred to the law as targeting out-of-state companies, especially in the method of calculating the liability based on gross revenues. She agreed that the law violated the ITFA because advertising in a nondigital format is not taxed in the state. The exclusion of news media sources from the tax violated the First Amendment.
The Maryland Attorney General’s Office is reviewing the case to determine next steps.
We will keep you updated as this issue continues to unfold.
1 Comcast of California/Maryland/Pennsylvania/Virginia/West Virginia LLC et al., v. Comptroller of the Treasury of Maryland, case number C-02-CV-21-000509, Circuit Court for the Anne Arundel County.
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