Tech groups sue Maryland over nation’s first online advertising tax

A coalition of trade organizations filed a lawsuit Thursday against the Maryland state government over passage of a bill that imposes a tax on digital ad revenue.

The Computer & Communications Industry Association (CCIA), along with the U.S. Chamber of Commerce and the Internet Association, sued Maryland Comptroller Peter Franchot (D).

CCIA’s members include Amazon, eBay, Facebook, Google and Uber.

According to court documents, the trade organizations accused Maryland legislators of passing the bill in order to “penalize” large digital advertising companies, characterizing the new tax as “punitive.”

The bill imposes a tax of up to 10 percent on a company with global revenue from digital advertising that exceeds $15 billion, with smaller percentages for companies with less revenue.

“The Maryland state tax aimed narrowly at a few companies’ but broadly taxing global revenues is concerning both in scope and precedent. The Maryland legislation suffers from numerous constitutional infirmities and we expect it to be blocked on legal grounds,” CCIA President Matt Schruers said in a release.

“Policymakers looking to fill budget gaps with punitive measures of this nature are setting state budgets up for failure.  Digital services make a critical contribution to local economies by providing tools to keep businesses functioning and people connected to school, work and family,” Schruers added.

The House of Delegates voted to pass the bill in January, overriding a prior veto by Gov. Larry Hogan (R) from 2020. Maryland is the first state to pass a digital ad revenue tax.

The suit alleges the tax goes against the Internet Tax Freedom Act, a federal law that bars “multiple and discriminatory taxes on electronic commerce.” The suit also argues that Maryland’s new statute will lead to a rise in “junk” content and raise costs for consumers.

When reached by The Hill, a representative for Franchot declined to comment, saying, “The comptroller does not comment on pending litigation.”