Maryland Becomes First State to Tax Big Tech’s Ad Revenue

Maryland decided to take a chunk of Big Tech’s advertising dollars on Friday, successfully passing legislation that would place a maximum tax of 10% on revenue from digital ads. Analysts estimate that the tax will generate about $250 million in its first year, money that the Maryland says will go to schools.

State lawmakers overrode Republican Gov. Larry Hogan’s veto of the tax bill, making Maryland the first state in the country to tax digital advertising sold by companies like Facebook, Google and Amazon. Hogan vetoed the bill in May of last year, arguing that it would raise taxes and fees on people in the state who were out of work and struggling financially.

As explained by the New York Times, the amount of tax paid will depend on a company’s global revenue. Companies that make at least $100 million but no more than $1 billion will have to pay a 2.5% tax on their digital ads. Meanwhile, companies that make more than $15 billion in global revenue per year will pay a 10% tax.

Bill Ferguson, the Democratic president of the Maryland State Senate and one of the main proponents of the tax, said in a Facebook post that the law will make big tech pay its fair share of taxes in the state, just like small businesses.

“Companies like Amazon, Facebook, and Google have seen their profits drastically increase during the COVID-19 pandemic while our Main Street businesses are struggling to keep up,” Ferguson said. “At a time when Maryland’s budget is being impacted in unforeseen and astronomical ways due to COVID-19, Maryland families and businesses can foot the bill, or big tech can start paying their fair share.”

The law faced opposition from Silicon Valley lobbying groups, state Republicans, telecom companies, and local media outlets, per the Times. Opponents argued that the tax would not be paid by Big Tech, but rather by the small businesses that buy the ads and their customers.

Marylanders For Tax Fairness, a group that represents businesses against the law, railed against Ferguson in a statement on Friday, accusing him of raising taxes and costs on Marylanders during the pandemic.

“This tax increase was historically shortsighted, foolish, and harmful to countless small businesses and employees, and Marylanders will remember it that way,” said Doug Mayer, the group’s spokesman.

Nonetheless, the fight over the digital ad tax isn’t over yet. Mayer said his group would continue to oppose the tax “wherever possible, including in a court of law.” The office of Maryland’s attorney general Brian Frosh has stated that while “there is some risk” that courts could find some provisions of the law unconstitutional, it should survive a court challenge.

Maryland’s tax could propel other states to move forward with similar efforts. Connecticut and Indiana have also introduced bills aimed to take a slice of Big Tech’s digital ad revenue.