A bill that would impose a digital ad tax in Maryland is being taken up again by the Maryland General Assembly. House Bill 732, which includes a digital ad tax that would be the first in the nation, was vetoed by Governor Larry Hogan last year, but supporters of the bill want to overturn Hogan’s veto and pass the legislation.
What Is The Maryland Digital Ad Tax?
According to MediaPost contributing editor Rob Williams, “The tax rate is on a sliding scale of 2.5% to 10%, based on the company's global revenue from any source — not just digital ad sales. That means companies like Google and Facebook, which make more than $15 billion a year in revenue worldwide, would pay the top rate of 10% on digital ads in Maryland. If they sell $100 million in digital ads, they'd be required to hand over $10 million to the state.” The taxes would be paid by the media vendor.
Are There Concerns About The Maryland Digital Ad Tax?
Yes. A recent editorial in the Baltimore Sun by three media and advertising professionals argued that the Maryland digital ad tax would be unfairly punitive to small businesses at a time when many are struggling already because of the impact of COVID-19. And, while tax rates will vary, many small businesses fall under the auspices of larger ones, particularly in publishing, and, with ad revenues already declining for those businesses, some worry the tax would have a worsening effect. “Businesses rely on advertising to inform consumers about their goods and services. The tax will force them to reduce their advertising at a time when they need to reach customers more than ever — even if it’s just to assure the public they’re still open.” Williams agrees, noting that big tech and media companies will pass the “costs of the tax to advertisers, and many small businesses will get priced out of the media market.” Currently, “advertising expenditures account for $101.5 billion of sales in Maryland.” The Maryland digital ad tax only applies to digital ads seen by Maryland residents, further complicating the issue.
How Does The Maryland Digital Ad Tax Impact Digital Advertisers?
Other states have passed advertising taxes in the past, only to find them ultimately repealed, so even if Hogan’s veto is overruled, it’s likely the tax will have a winding road to ratification and implementation. For the moment, it’s a watch and wait scenario for advertisers, as Maryland lawmakers reconvene to decide the future of the Maryland digital ad tax.
On February 12, the Maryland State Senate voted to approve the digital ad tax, overriding Governor Hogan's veto. The tax is likely to face court challenges.
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