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ANA Fires Warning Shot Over Maryland Digital Ad Tax

The Association of National Advertising is sounding the alarm on new legislation in Maryland that could levy a 10% tax on digital advertising.

The Maryland bill would be a gross revenues tax on "certain" digital ad services, and would presume 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.

Related: Supremes Allow States to Tax Online Retailers

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.

"After a period of relative calm in regard to state advertising taxes, there are now signs that these issues are heating up quickly as we enter the new year," blogged ANA Group executive VP of government relations for ANA Dan Jaffe. "Bills have already been introduced that would tax advertising in both traditional and nontraditional ways," he said.

The Maryland bill is one of the latter, since it would be the first of its kind in the nation, Jaffe said.

According to Jaffe, the bill levies a 10% tax on “annual gross revenues of a person derived from digital advertising services in the state.” The tax would adjust according to a company’s global annual gross revenue. He said the definition of who the tax would cover is broad and so could sweep in a lot of companies.

The tax would also extend to companies "that reasonably expect the person’s annual gross revenues derived from 10 digital advertising services to exceed a certain amount to complete." How that would be determined is also unclear, he said.

On the traditional ad tax front, Jaffe noted that a bill was introduced in the Nebraska legislature that would lower the state sales tax, but create a new services tax that likely applies to advertising services, the sort of tax ANA has been fighting for years.

Jaffe said ad taxes are counterproductive, creating "a double tax on the effort to sell and the sale itself, while simultaneously being ineffective due to the substantial geographic mobility of advertising." Translation: "Advertisers can move their money to states without such taxes."