Advertisers Blast Maryland's Proposed Digital Ad Tax

A proposed bill in Maryland that would tax digital advertising is “extremely detrimental” and would “create a regulatory enforcement nightmare,” the Association of National Advertisers says.

The bill, SB 2, would impose a tax ranging from 2.5% to 10% of revenue derived from advertising to users who appear to be in the state based on their IP address.

The measure would only apply to companies that glean more than $100 million in global digital advertising revenue.

The measure could raise an estimated $250 million, according to a memo prepared by the state Department of Legislative Services. The agency adds that the bill is aimed at “large multinational corporations, such as Alphabet/Google, Amazon, Facebook, and others that have a large presence in digital advertising.”

The memo also notes that the bill could face legal challenges.

“Past efforts to impose taxes on the news media or advertising revenues have been rejected by the U.S. Supreme Court on First Amendment grounds,” the agency writes.

In addition, the Maryland Court of Appeals ruled in the 1950s that a proposed tax in Baltimore on television, newspaper, and radio advertising would have violated the First Amendment.

The ANA, which testified against the bill Wednesday at a hearing of the Maryland Senate Committee on Budget and Taxation, adds that the bill could also be unconstitutional because it would tax companies based on business activity outside the state.

The ANA also argues the bill would tax companies based on mere “guesses” about consumers' locations, given that consumers' IP addresses don't always reveal their locations.

“Taxing advertising is extremely detrimental and has been rejected by over 40 states that have considered this issue,” the advertising group wrote this week in a blog post. “We understand the need in Maryland to seek funding and support for educational purposes, but this proposal will cause substantially more harm than good.”

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