A Maryland state tax court has struck down the state’s digital advertising tax, ruling that the measure violates several federal and constitutional protections. The decision also orders Maryland officials to return tax payments already collected from companies including Apple, Google and Peacock TV.
Maryland’s Digital Ad Tax Faces Legal Defeat
The tax was approved in 2021 and became the first state tax in the United States specifically targeting revenue generated from digital advertising.
Maryland designed the measure to raise money for major education initiatives, with state estimates suggesting it could generate approximately $250 million annually.
The tax applied to companies with more than $100 million in worldwide annual revenue, with rates ranging from 2.5% to as high as 10% for companies with at least $15 billion in global revenue.
Court Cites Federal and Constitutional Concerns
The Maryland Tax Court concluded that the law conflicts with the federal Internet Tax Freedom Act and also violates provisions involving free speech, interstate commerce and due process.
The court also questioned Maryland’s decision to calculate the tax using companies’ worldwide revenue rather than revenue specifically generated from advertising within the state.
The ruling comes after years of legal challenges from major technology companies and could have implications for other states considering similar digital advertising taxes.
Apple, Google and Peacock Ordered to Receive Refunds
As part of its decision, the court ordered Maryland to repay digital advertising tax money that had already been collected from Apple, Google and Peacock TV.
Other major technology companies, including Meta and Amazon, have also challenged Maryland’s digital advertising tax through different legal proceedings, arguing that the measure unfairly targeted large technology businesses.
The refunds could therefore become an important part of the broader financial consequences of the court’s ruling.
Earlier Federal Court Ruling Added Pressure
The Maryland tax had already faced a significant legal setback.
In 2025, the 4th U.S. Circuit Court of Appeals ruled that part of the law was unconstitutional because it prevented companies from telling customers about the tax. The court found that restriction violated free-speech protections.
The latest Maryland Tax Court decision goes further by striking down the tax itself on several legal grounds.
State Leaders Plan to Continue the Fight
Maryland legislative leaders said they disagree with the tax court’s decision and expect the legal process to continue.
They argued that the law was intended to modernize the state’s tax system as advertising increasingly shifts from traditional media toward digital platforms.
State officials have indicated that they remain committed to developing a tax system that reflects changes in the modern economy.
Why the Decision Matters Beyond Maryland
The case is being closely watched because other states have considered or explored ways to tax revenue generated by digital platforms and online advertising.
A successful challenge could make states more cautious about adopting similar measures, particularly if those taxes are based on worldwide corporate revenue or treat digital advertising differently from comparable forms of advertising.
The ruling could also influence future debates over how governments should tax rapidly evolving technology businesses.
What Happens Next?
The legal battle is not necessarily over. Maryland officials have indicated that they intend to continue pursuing the matter through the courts.
For technology companies, the decision represents an important legal victory and could potentially result in refunds while limiting the state’s ability to collect the disputed tax.
For Maryland, the case raises a broader question about how to generate revenue from the digital economy while remaining within federal and constitutional limits.
The outcome could ultimately influence digital taxation policies well beyond Maryland as governments across the United States look for new ways to adapt their tax systems to an increasingly digital economy.
