Maryland Passes First US Tax On Digital Ads

Maryland lawmakers Friday threw the tax gauntlet down in front of Big Tech.

The state’s lawmakers overturned a gubernatorial veto of a new tax on digital advertising revenue that the New York Times described as the first of its kind in the United States — and possibly the first of many, based on its success against potential legal challenges.

The tax on sales of digital ads — and not just on sales of products referenced in the ads — is structured in order to reap more proceeds from larger online players. Among the hardest hit would be Amazon, Google and Facebook. Advocates and opponents alike estimate the measure will raise about $250 million annually for the state.

The new tax will take effect 30 days following Friday’s override by the Democrat-controlled state Senate of a prior veto by Republican Gov. Larry Hogan. The Democrat-controlled House of Delegates also had approved the measure, the Baltimore Sun reported.

The Washington Post stated in a report on the override: “The clash carries immense national implications at a time when states are struggling to balance their budgets and front the ever-rising costs of a national public-health emergency. The scramble to raise new money — and the newfound interest in taxing tech — reflects a growing belief among government officials nationwide that Silicon Valley for too long has failed to share the bounty of its unrivaled economic growth.”

The state’s teachers unions were among the measure’s backers, the Sun reported, because of a commitment by lawmakers to use the new taxes to bolster education spending.

Small business groups opposed the measure, according to published reports.

Maryland lawmakers have indicated they will introduce follow-up legislation aimed at preventing Internet companies from passing the new tax on to advertisers and exempting news organizations from having to pay it, the Sun reported.