Federal Court to Review Maryland’s Digital Ad Tax

(TotalConservative.com) – A lower federal court just received orders from a federal appeals court to hear a case challenging a proposed digital advertising tax in Maryland, the first of its kind in the nation.

The Maryland digital advertising tax law is one that Big Tech lawyers have been fighting against heavily, contending that the legislation unfairly targets larger companies like Google, Amazon, and Facebook. Other states have also been monitoring the legal case, some of which are proposing similar online ad taxes.

On Wednesday, Jan. 10, a panel of three judges from the 4th US Circuit Court of Appeals opposed the decision by a lower federal court to dismiss a First Amendment challenge to the Maryland law from the US Chamber of Commerce and other trade associations. The decision sends the case back to the lower court to be heard.

The law in Maryland would tax companies like Google and Facebook for profits made using digital advertisements online and prohibit these companies from allocating extra costs to customers purchasing ad space. The plaintiffs challenging the law argue that specific provision goes against the First Amendment. In a statement with the decision, the appeals court said the district court itself must first decide whether the specific provision they’ve sent back “restrains speech” and “passes constitutional muster.”

Although the court of appeals agreed to allow that challenge to proceed, three other challenges brought forward under the Due Process and Commerce Clauses of the Internet Tax Freedom Act were allowed to be dismissed by the lower court as prohibited under the Tax Injunction Act. The three judges on the appeals court did vacate the original judgment, which dismissed the challenges with prejudice, and ordered them dismissed without prejudice instead – this would allow the challenges to be brought up again in a different legal venue.

The lower court dismissed the First Amendment challenge, arguing it was moot. That was after a separate state trial declared the digital ad tax to be unconstitutional, a judgment later thrown out by the state Supreme Court.

Democratic Attorney General of Maryland, Anthony Brown, made a statement following the recent appellate court decision and maintained his resolve to continue defending the legislation, which he says is still valid and described it as “transformative.” He argued that the digital ad tax would “provide critical funding” for improvements to the public education system of Maryland.

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