Maryland Governor Vetoes Digital Ad Tax

Maryland Governor Larry Hogan has vetoed a bill that would have imposed a new tax on digital ad revenue.

“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,” he stated Thursday. “To do so would further add to the very heavy burden that our citizens are already facing.”

State lawmakers can override the veto by a three-fifths vote. When the bill passed in March, the vote was 89-45 in the House, and 30-15 in the Senate.

The measure would have imposed new taxes on companies that have more than $100 million in digital ad revenue. Rates would have varied from 2.5% to 10% of revenue attributable to Maryland, with the percentage tied to global revenue.

Companies taking in between $100 million and $1 billion in digital ad revenue globally would have been taxed at the 2.5% rate, while those taking in more than $15 billion would have been assessed at the 10% rate.

The measure was opposed by a broad coalition of advertising and media companies, including the Association of National Advertisers, American Association of Advertising Agencies, Interactive Advertising Bureau, Motion Picture Association – America, National Association of Broadcasters, NCTA -- The Internet & Television Association, Network Advertising Initiative and News Media Alliance.

They argued the measure was illegal for several reasons, including that it may violate the federal Internet Tax Freedom Act Preemption, which bars taxes that discriminate against online commerce. They also said the law would violate the U.S. Constitution by targeting digital ads -- a type of commercial speech entitled to some First Amendment protections.

The ANA praised Hogan for vetoing the measure.

“At a time when businesses are facing unprecedented challenges amid the COVID-19 pandemic, Governor Hogan’s decision will substantially help Maryland consumers and businesses,” the group stated. “The veto of this counterproductive proposal is an important victory for ANA and our members.”

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