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 European Union is considering levying a 3% tax on digital sales and services that would affect edge providers and anyone else doing digital business in the EU and it has the Trump Administration and tech companies both raising red flags.

According to the Tax Foundation the EU is trying to come up with a uniform definition of a "digital permanent establishment" for companies doing digital business in an EU member state, which would "be at least $8.1 million (€7 million) in annual EU revenues, more than 100,000 users and more than 3,000 contracts for digital services with businesses in the EU."

That would be a long-term solution, while in the short term the EU would levy a digital services tax, or DST, on companies with annual worldwide revenues of at least $868 million (€750 million) and EU revenues of at least $58 million (€50 million).

It would be a tax on digital revenues from ad space, online sales, sales of user data and more.

In a statement Thursday, Treasury Secretary Steve Mnuchin said the Administration has "strong concern with countries’ consideration of a unilateral and unfair gross sales tax that targets our technology and internet companies. A tax should be based on income, not sales, and should not single out a specific industry for taxation under a different standard."

He warned the EU against unilateral action.

Tech association ITI, whose members include Amazon, Apple, Google and Microsoft, agreed.

“The imposition of a digital tax poses a real and significant threat to companies in all sectors of the economy," said ITI CEO Dean Garfield, "While the notion of a digital tax isn’t new, the likelihood of its implementation is gaining momentum and its possible passage should be taken seriously by all major economies. We welcome the administration’s attention to this issue and share its concerns."

He called the tax a "dangerous precedent" that could violate existing treaties. "We join the administration in urging the European Union to take a multilateral approach to address these complex and far-reaching tax policies and to finish the...process with the United States and other nations.”

The National Cable & Telecommunications Association is pushing the tax angle of Title II reclassification hard in Washington and elsewhere.

NCTA is running print and digital ads this week and next in some Hill-targeted D.C. publications, as well as the Washington Post, USA Today, WTOP, The Weather Channel, and the Huffington Post, to tell consumers just what cable ops think Title II will mean to their monthly statements, which is in essence some government-supplied bill shock. "The 'T' in title II Stands for Taxes," NCTA warns, a point it has also made to the FCC

"By imposing billions of dollars of new taxes on broadband service, Title II will be a massive tax increase on millions of American consumers," NCTA spokesman Brian Dietz said. "We think it’s important that consumers and policymakers understand that imposing this unprecedented and unnecessary regulation on the Internet comes with a significant price tag for most Americans. 

The ad (shown above), cites a Progressive Policy Institute analysis that predicts consumer bills could soar (increase to close to $90 a year on average) under Title II.

The ad echoes NCTA's arguments that Title II will harm investment in and by ISP's and innovation in the sector. "The Only Thing Title II Won't Slow is the Tax Collector," NCTA said.

The FCC is currently contemplating Title II reclassification, some form of hybrid Title II and Sec. 706 authority, or a Sec. 706 approach to restoring no-blocking and no-unreasonable discrimination rules thrown out by a federal court. But there has been increased pressure to go the Title II route from network neutrality advocates, including the President of the United States.

The FCC is expected to vote on new rules sometime in the first quarter of 2015, but could seek comment on those various proposals in a separate item further teeing up that vote. It is not clear whether the FCC will simply proceed to a vote on however it modifies FCC chairman Tom Wheeler's original Sec. 706-based network neutrality rule restoration or take the additional step of seeking comment on some of the responses to that original proposal.