Maryland’s law on digital taxation has been sidelined by the Circuit Court. The ruling, however, does not change how taxpayers treat digital taxation in the state of Maryland. Until rules are reversed, taxpayers must adopt and comply.

By Judy Vorndran

The first-in-the-nation digital advertising tax out of Maryland has been sidelined by the Court. Anne Arundel County Circuit Court in Comcast v. Comptroller held on October 17 that the state’s tax violates the Internet Tax Freedom Act (ITFA), the federal commerce clause, and the first amendment. The Court ruling requires that the plaintiff submit a more specific proposed order by October 21.

While the issue is far from dead, the breadth of law used to deny the case in the bench ruling plus the similarities of digital advertising to traditional advertising that the judge used to sideline the case indicates the court’s thoughts on unfair treatment under ITFA. The ruling also took issue with how Maryland was calculating the rate based on worldwide income on all sales, not just advertising.

The Takeaway

Sometimes states make bad tax laws, but until they are reversed, taxpayers need to determine how to adopt them. This is why having a good state tax team in your back pocket is instrumental in keeping abreast of constantly evolving state tax laws and why the SALTovation team at TaxOps exists – we are the experts so you do not have to be.

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