Maryland Lawmakers Poised To Override Ad Tax Veto This Week

Lawmakers in Maryland are expected to decide this week whether to override Governor Larry Hogan's veto of a new tax on digital ad revenue.

The bill (HB 732), which was passed last March by a vote of 89-45 in the House, and 30-15 in the Senate, would impose 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.

Hogan vetoed the measure in May, stating it would be “unconscionable” to raise taxes during the pandemic.

The legislature can override the veto with by a three-fifths vote. State Senate President Bill Ferguson said this week he expects the lawmakers to do so, according to The Baltimore Sun.

The bill is opposed by numerous business groups, which have signaled they will challenge the law in court.

Opponents, including the Association of National Advertisers, argue the bill violates the federal Internet Tax Freedom Act, which bars taxes that discriminate against online commerce.

The ANA and others also argue the law is unconstitutional, in part because it assesses a tax rate based on activity that occurs outside the state. That structure violates a provision in the constitution that prohibits one state from attempting to regulate activity occurring in other states, according to opponents.

“There's a raft of issues that make this particular law unconstitutional,” ANA Executive Vice President for Government Relations Dan Jaffe says.

He adds that the ANA would “seriously consider” joining in a legal challenge to the tax, should Maryland lawmakers override the veto.

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