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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
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Worse Than Advertised:
The Legal and Economic Pitfalls of
Maryland’s Digital Advertising Tax
• The Maryland General Assembly is on the verge of adopting a vaguely
worded, legally dubious tax on digital advertising in the final days of this
session—now paired with new tobacco taxes.
• Although lawmakers intend to tax large out-of-state businesses, much of the
tax burden would be borne by Maryland-based businesses and Maryland
consumers. High taxes on digital advertisements also undercut consumer
choice by pushing more content toward subscription models.
• The definition of digital advertising is vague, leaving open to interpretation
whether sponsored content, email marketing, or rebroadcasting of content
that did not originate online could incur tax liability.
• After concerns were raised about how advertisements would be determined
to have been served to Maryland users, lawmakers amended the bill to punt
on the question, leaving it up to the state comptroller.
• The tax likely violates federal law by imposing discriminatory taxes on
electronic commerce and faces serious challenges under the Dormant
Commerce Clause of the U.S. Constitution, as well as other constitutional
provisions, and will almost certainly lead to extensive litigation.
• Business activity is already taxed, and justifications for a standalone digital
advertising tax are weak.
Director of State Tax Policy
TAX FOUNDATION | 2
An old adage counsels against picking a fight with those who buy