state of Maryland has successfully defended its digital advertising tax against a legal challenge from the Chamber of Commerce and tech industry lobbying groups. Judge Lydia Kay Griggsby of the US District Court for the District of Maryland ruled that while the tax does restrict protected speech, the challengers did not prove that a substantial number of the law’s applications are unconstitutional.
The digital advertising tax, which was implemented in 2021, includes a “pass-through prohibition” that prevents digital advertising services from passing the cost of the tax on to customers through additional fees or line-items. The Chamber of Commerce and tech industry groups argued that this provision violated the First Amendment rights of businesses.
However, Judge Griggsby ultimately sided with the state of Maryland, finding that the challengers did not meet the burden of proof to show that the law was unconstitutional in a significant number of cases. The ruling is seen as a victory for the state’s efforts to tax digital advertising, which is becoming an increasingly important revenue source as more advertising moves online.
The decision sets a precedent for other states considering similar digital advertising taxes and highlights the ongoing debate over how to regulate and tax the online advertising industry. Despite the legal challenge, Maryland can continue to enforce its digital advertising tax without violating the First Amendment rights of businesses.
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