Maryland: Digital advertising services tax is unconstitutional (State Tax Court decision)
Maryland Tax Court held the state’s digital advertising gross revenues tax violates federal law and constitutional provisions, supporting taxpayers’ refund claims.
The Maryland Tax Court recently issued its determination in the litigation involving three technology industry taxpayers and the Maryland Comptroller regarding the legality of the state digital advertising gross revenues (DAGR) tax enacted in 2021.
The taxpayers had paid the tax due for tax year 2022 and sought refunds, which the Comptroller had denied. After exhausting their administrative remedies pursuant to Maryland law, the taxpayers filed appeals of the refund denials with the tax court. During the appeals process, both the taxpayers and the Comptroller filed cross motions for summary judgment, and the Comptroller requested a hearing on the issue of whether digital advertising services are “similar” to non-digital advertising services for purposes of the federal Internet Tax Freedom Act (ITFA).
In its determination, the court found for the taxpayers in all major regards, holding that the DAGR tax violated ITFA, as well as the dormant Commerce Clause, and the Due Process Clause of the U.S. Constitution.
Read an August 2026 report prepared by KPMG LLP