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.