Feb 12, 2021 - Technology

Maryland becomes first state to enact tax on digital advertising

The Maryland State Capitol Building is seen in Annapolis 23 November 2007 33 miles (53kms) east of Washington, DC.

The Maryland State Capitol Building in Annapolis. Photo: Jim Watson/AFP via Getty Images

Maryland has become the first state in the U.S. to enact a tax on the revenue generated from digital advertisements.

Driving the news: The state's Senate on Friday joined the House of Delegates in voting to override Republican Gov. Larry Hogan's veto of a tax on the revenue that large tech companies generate from showing online ads to Maryland residents. Democrats control both chambers.

Why it matters: Money raised from the tax would help to bridge budget gaps, with most of the funds going public schools.

  • Analysts estimate the tax of up to 10% would generate as much as $250 million in the first year, per The New York Times.

Our thought bubble via Axios' Ashley Gold: We can expect imminent lawsuits from critics who have said the law is unworkable, discriminatory and unconstitutional.

  • “It is a shame that the Maryland General Assembly chose political theater over sound public policy with today’s veto override vote of HB 732,” said Robert Callahan, senior vice president of state government affairs at the Internet Association.
  • “At least Maryland businesses and consumers can rest easier knowing that the courts will have the last say on this matter, and that the law, not politics, will decide the outcome," he added in a statement.

The big picture: The law resembles similar taxes passed in the European Union.

  • Other states across the U.S. are pursuing similar measures.
  • The states are acting at a moment when, despite lots of talk in Washington about changing the ground rules for tech, federal lawmakers are preoccupied with impeachment and COVID-19 relief, Gold reported.

Go deeper: States leapfrog federal government in restraining tech

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