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  • John R. Trippier, CPA – Director

Maryland Enacts Digital Advertising Gross Revenues Tax

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Effective for taxable periods beginning 1/1/2021, Maryland has enacted a Digital Advertising Gross Revenues Tax (“Digital Advertising Tax”) that will tax the annual gross revenues from advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services. “Annual gross revenues” means income or revenue from all sources, before any expenses or taxes, computed according to generally accepted accounting principles (“GAAP”). The assessable base of annual gross revenues from digital advertising services is defined to include those derived from Maryland. Services derived from Maryland is calculated by apportioning advertising services using the following percentage:



The statute does not define “services derived from Maryland.” Instead, the statute provides that the Comptroller shall adopt regulations that determine the state from which revenues from digital advertising services are derived.


Digital advertising services derived from Maryland will be subject to tax based on the following rates:



Filing requirements are based on the amount of annual gross revenues derived from digital advertising services in Maryland. An annual return is due for a person that has at least $1,000,000 in annual gross revenues derived from digital advertising services in Maryland. Estimated quarterly returns are due for persons with over $1,000,000 annual gross revenues derived from digital advertising services in Maryland. Quarterly estimated returns are due on or before April 15, June 15, September 15, and December 15. Although the statute does not state so specifically, it apparently does not impose the Digital Advertising Tax on persons with $1,000,000 or less in annual gross revenues derived from digital advertising services in Maryland. Additionally, even though a person with over $1,000,000 annual gross revenues derived from digital advertising services in Maryland is required to file returns, that person will not have any tax liability if it has less than $100,000,000 in global annual gross revenues because the tax rate on the person would be 0%.


Due to the controversial nature of the tax (Maryland legislature had to override the Governor’s veto to pass the tax and Maryland’s Attorney General suggested that a prior version of the statute had constitutional issues), you will want to stay tuned to the Maryland legislature for any proposed changes to the tax and to court challenges. A challenge to the tax has already been filed in the federal district court for the northern district of Maryland claiming that the Digital Advertising Tax violates the discrimination prong of the Internet Tax Freedom Act and several provisions of the United States Constitution, including the Commerce Clause (both the Interstate and Foreign Commerce Clauses), and the Due Process Clause.


ZHF Observations


The Digital Advertising Tax raises many unanswered questions, constitutional issues, and is unquestionably vague in many areas, including the following:


  • It is unclear as to what the apportionment percentage is being applied to – all gross revenues? Does all gross revenue include all global revenues? If so, using a denominator that only includes U.S. gross revenues seems rather inequitable and potentially unconstitutional.

  • If the intent is to tax annual gross revenues from advertising services in Maryland (assessable base definition), then it appears that such amount is simply the numerator of the apportionment percentage. Why, then, is there any need to apportion?

  • The Digital Advertising Tax obviously is intended to tax only very large taxpayers, as there is no tax rate for businesses with less than $100,000,000 in global annual gross revenues. However, the Digital Advertising Tax requires taxpayers with annual gross revenues from digital advertising services derived from Maryland totaling over $1,000,000 to file annual returns and quarterly estimates.

  • Maryland’s Digital Advertising Tax is lacking details including, for instance, clarity regarding the treatment of related party receipts. Such vagueness creates serious constitutional concerns.

  • Because Maryland does not tax advertising services using other methods, the Digital Advertising Tax may run afoul of the discrimination prong of the Internet Tax Freedom Act.


If you have any questions regarding the Maryland Digital Advertising Tax or other gross receipts taxes, please contact Rich Farrin, John Trippier or any other ZHF professional.

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