Tech groups sue Maryland for first national tax on online advertising

A coalition of business organizations filed a lawsuit Thursday against the state government of Maryland for passing a bill that imposes a tax on digital advertising revenue.

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

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

According to court documents, business organizations accused Maryland lawmakers of passing the bill to “penalize” large digital advertising companies, calling the new tax “punitive.”

The bill imposes a tax of up to 10% on a business with global digital advertising revenues exceeding $ 15 billion, with lower percentages for businesses with lower revenues.

“The state of Maryland tax, narrowly targeting a few businesses, but heavily taxing global revenues, is concerning both in scope and precedent. Maryland’s law suffers from many constitutional infirmities and we expect it to be blocked for legal reasons, ”CCIA President Matt Schruers said in a statement.

“Policy makers who seek to fill budget deficits with punitive measures of this nature are setting state budgets up for failure. Digital services make a vital contribution to local economies by providing tools to keep businesses and people running connected at school, work and family, ”added Schruers.

The House of Delegates voted to pass the bill in January, overturning Gov. Larry Hogan (R) ‘s pre-veto from 2020. Maryland is the first state to pass a tax on digital advertising revenue.

The lawsuit alleges that the tax violates the Internet Tax Freedom Act, a federal law that prohibits “multiple and discriminatory taxes on electronic commerce.” The lawsuit also argues that Maryland’s new law will lead to an increase in “junk” content and increase costs to consumers.

When contacted by The Hill, a representative for Franchot declined to comment, stating: “The Monitor is not commenting on pending litigation.”

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