This article was republished with permission from WTOP’s news partners at Maryland Matters. Read the story at Maryland Matters.
Maryland state officials are seeking a review from a circuit court regarding a recent ruling by the state tax court that invalidated a groundbreaking digital advertising tax. This tax was designed to provide funding for education reform in Maryland.
The challenge was initiated by three major technology companies—Apple, Google, and Peacock TV—who contested the law enacted in 2021. In a series of rulings delivered in August, the Maryland Tax Court sided with these companies, concluding that the law infringed upon the federal Internet Tax Freedom Act. In response to these decisions, an appeal has been filed in the Anne Arundel Circuit Court, requesting a judicial reassessment.
Comptroller Brooke Lierman expressed her disagreement with the tax court’s decisions in a statement sent via email. She stated, “I fully support the Attorney General of Maryland’s appeal of these decisions.” She maintained optimism that the state’s judicial system would ultimately deem the law constitutional upon review, adding, “The General Assembly enacted this law to align with the realities of today’s economy, to ensure that the biggest tech companies doing business in Maryland pay their fair share and to provide essential support to Maryland’s public schools.”
The circuit court’s task will be to examine the tax court’s ruling for any legal errors. At this time, no hearing date has been established.
A spokesperson for NetChoice, an industry organization that includes prominent companies such as Meta, X, and Google among its members, indicated that they were unable to provide immediate comment on the appeal as of Tuesday.
The 2021 law specifically targets major technology firms like Apple, Meta, and Google, imposing a 2.5% tax on companies with a reported gross global revenue of at least $100 million. The tax escalates in increments of 2.5% based on revenue, reaching a maximum rate of 10% for companies reporting $15 billion or more in gross income.
According to estimates, this tax could potentially generate up to $250 million annually. The revenue collected from this tax is allocated to the Blueprint for Maryland’s Future K-12 education reforms.
Over the past five years, the state has collected about 43% of that estimated total. Although Maryland has amassed more than half a billion dollars, these funds have yet to be disbursed due to the ongoing legal disputes.
Since its implementation, this law has faced scrutiny in both state and federal courts. Certain sections were nullified last year by a federal appeals court on the grounds of violating free speech protections.
Just last month, the tax court ruled in favor of the three digital companies. It’s important to note that the state tax court operates as an administrative body, rather than a conventional judicial forum. The outcomes of the three rulings were aligned despite variations in the specific arguments presented by each company.
In the ruling concerning the case brought by Peacock, the court identified violations of the First Amendment. The court concluded that the law discriminated against digital streaming services compared to traditional broadcasters.
At the same time, a comparable law is currently being challenged in Illinois by NetChoice, which has drawn inspiration from Maryland’s legislation.
In their recent filing in Illinois, NetChoice cited the Maryland Tax Court’s decisions from August as part of their argument.
