Maryland Has A Proposal To Tax Digital Advertising

The state of Maryland has proposed a digital advertising tax on companies with more than $100 million in digital ad revenue. This proposed tax will be going after advertising giants such as Facebook, Google & Linked-In. The digital advertising tax could apply a levy from 2.5% – 10% on revenue from digital ads that target IP addresses in Maryland real estate area. The tax will be based on the company’s global annual gross revenues. 

Advertising Tax Rate:

  1. Global annual gross revenues of $100,000,000–$1,000,000,000: 2.5% of the assessable base
  2. Global annual gross revenues of $1,000,000,001–$5,000,000,000: 5% of the assessable base
  3. Global annual gross revenues of $5,000,000,001–$15,000,000,000: 7.5% of the assessable base
  4. Global annual gross revenues exceeding $15,000,000,000: 10% of the assessable base

Maryland Senate President, Bill Ferguson of Baltimore, and Senate President Emeritus Thomas V. Mike Miller proposed this tax as a way to fund a $4 billion public school overhaul. The Washington Post reported that the bill could yield as much as $250 million per year in tax revenue.

This proposed new bill could could effectively encourage companies to move marketing dollars away from online advertising platforms since traditional advertising revenue is not taxed in Maryland. This element of the digital advertising tax is likely to be in violation of the federal Internet Tax Freedom Act, which protects online businesses from punitive or discriminatory taxation of electronic commerce.

The proposed advertising tax contradicts a 100+ year old U.S. state tax policy by imposing a tax on an intermediate good or service instead of end retail consumption, which has long been the foundation of the American state sales and use tax. 

To put it bluntly, we at Conversion Pipeline think this is a terrible idea. Maryland should figure out a way to cut wasteful spending to allocate funds for important projects instead of proposing new taxes that would negatively impact job growth and cost consumers more. For any questions regarding the Maryland tax on digital advertising, please contact Annapolis Accounting firm TMDL CPAs.