Computer companies have filed a complaint in U.S. district court against Maryland's Digital Advertising Gross Revenues Tax, asking the court to declare the law is, itself, unlawful and barring its enforcement.

The complaint was filed by the Computer & Communications Industry Association (CCIA) along with the U.S. Chamber of Commerce, Internet Association, and NetChoice. CCIA members include Amazon, Dish, Google, eBay, and Facebook.

The Maryland General Assembly last week overrode Governor Larry Hogan's veto of the new law (HB 732). The Association of National Advertisers (ANA), which signaled it would take the law to court as well.

The law institutes a gross revenues tax on "certain" digital ad services, and presumes that digital ads are provided in the state under "certain" circumstances and require "certain" persons with "certain" annual gross revenues from digital ad services to pay the tax.  

Also Read: ANA Warns of D.C. Ad Tax

In its complaint, the groups call the act a "punitive assault on digital, but not print, advertising."

They argue it is meant to penalize digital advertisers, citing testimony during the bill's consideration to the effect that digital ad companies were eroding "the shared values and norms of American society."

They say taxing digital ads will reduce resources for creating high-value content, leaving the field open to low-quality "junk." They also say that it will raise consumer costs. 

Also Read: Advertisers Try to Help Providers Navigate CCPA

"Simply put, the Act will harm Marylanders and small businesses and reduce the overall quality of internet content—all while doing nothing to stave off the dissemination of misinformation and hate speech."

The law is itself unlawful in "myriad" ways, they say, including that it is preempted by the Internet Tax Freedom Act (ITFA) prohibition on “multiple and discriminatory taxes on electronic commerce," and violates due process "by burdening and penalizing purely out-of-state conduct and interfering with foreign affairs."

The Association of National Advertisers is celebrating the veto Thursday (May 7) of a Maryland digital ad tax bill that passed the legislature but fell under the weight of the governor's veto and the downward economic pressure of a pandemic. 

ANA had pushed back hard on the legislation. 

The Maryland almost-law (HB 732) would have been a gross revenues tax on "certain" digital ad services, and would have presumed that digital ads are provided in the state under "certain" circumstances and require "certain" persons with "certain" annual gross revenues from digital ad services to pay the tax.  

But Republican Governor Larry Hogan said the economic fallout from the COVID-19 pandemic means it would be "unconscionable" to approve any new "tax hike" legislation. The bill would have boosted the state's coffers, which have also been hit hard by the virus.  

He said the bill was misguided and would raise taxes at a time when many are out of work and struggling.  

Ad sales and services taxes are periodically introduced as states look for new revenue and ANA is always on the lookout to spread the alarm when that happens, but ANA said this would have been the first one that had passed a legislature. 

The Maryland bill would have levied a 10% tax on “annual gross revenues of a person derived from digital advertising services in the state.” The tax would have adjusted according to a company’s global annual gross revenue and could have applied to a lot of companies. The tax would also have extended to companies "that reasonably expect the person’s annual gross revenues derived from 10 digital advertising services to exceed a certain amount to complete." 

"The veto of this counterproductive proposal is an important victory for ANA and our members," said ANA. "It relieves small and large businesses of a major burden on their efforts to market their products and services, which in turn helps protect the almost 400,000 Marylanders whose jobs are supported by the sale of products and services generated by advertising – nearly 15 percent of the 2.6 million jobs in the state."

The Association of National Advertisers is celebrating the veto Thursday (May 7) of a Maryland digital ad tax bill that passed the legislature but fell under the weight of the governor's veto and the downward economic pressure of a pandemic.

ANA had pushed back hard on the legislation.

The Maryland almost-law (HB 732) would have been a gross revenues tax on "certain" digital ad services, and would have presumed that digital ads are provided in the state under "certain" circumstances and require "certain" persons with "certain" annual gross revenues from digital ad services to pay the tax.

But Republican Governor Larry Hogan said the economic fallout from the COVID-19 pandemic means it would be "unconscionable" to approve any new "tax hike" legislation. The bill would have boosted the state's coffers, which have also been hit hard by the virus.

He said the bill was misguided and would raise taxes at a time when many are out of work and struggling.

Ad sales and services taxes are periodically introduced as states look for new revenue and ANA is always on the lookout to spread the alarm when that happens, but ANA said this would have been the first one that had passed a legislature.

The Maryland bill would have levied a 10% tax on “annual gross revenues of a person derived from digital advertising services in the state.” The tax would have adjusted according to a company’s global annual gross revenue and could have applied to a lot of companies. The tax would also have extended to companies "that reasonably expect the person’s annual gross revenues derived from 10 digital advertising services to exceed a certain amount to complete."

"The veto of this counterproductive proposal is an important victory for ANA and our members," said ANA. "It relieves small and large businesses of a major burden on their efforts to market their products and services, which in turn helps protect the almost 400,000 Marylanders whose jobs are supported by the sale of products and services generated by advertising – nearly 15 percent of the 2.6 million jobs in the state."