Maryland Supreme Court dismisses challenge to digital advertising tax
Circuit Court for Anne Arundel County lacked jurisdiction over lawsuit
Maryland Supreme Court dismisses challenge
The Maryland Supreme Court on May 9, 2023, issued an order holding that the Circuit Court for Anne Arundel County lacked jurisdiction over a lawsuit alleging the state’s digital advertising gross revenues tax was unconstitutional and/or violated the Internet Tax Freedom Act.
The order states that the appellees failed to exhaust their administrative remedies and notes that the reasons for this conclusion will be addressed in a forthcoming opinion. The action was remanded to the Circuit Court with directions to dismiss the action.
Background
An Anne Arundel County Circuit Court judge on October 17, 2022, struck down Maryland’s digital advertising tax after a hearing on certain motions associated with the case. Read TaxNewsFlash
An order issued on October 21, 2022 confirmed that the judge determined the digital ad tax violated the Internet Tax Freedom Act and also discriminated against interstate commerce in violation of the Commerce Clause. The order also concluded that the tax violated the First and Fourteenth Amendments of the Constitution because it singled out specific taxpayers and was not content neutral. The matter was subsequently appealed to the state’s highest court.
Next steps
While the litigation is likely not entirely over, there may be considerable time before a decision on the merits is issued. In the interim, taxpayers will need to carefully consider next steps. The first Maryland digital advertising tax return was due on April 15, 2023.
For more information, contact a KPMG State and Local Tax professional:
Jeremy Jester | jjester@kpmg.com
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.