08/20/2026
States considering taxes on digital or targeted advertising may need to revisit their proposals following three decisions from the Maryland Tax Court.
On August 14, the Tax Court ordered refunds, with applicable interest, to Apple, Google, and Peacock TV. In each case, the court found that Maryland’s digital advertising tax violated the Internet Tax Freedom Act, the dormant Commerce Clause, and the Due Process Clause.
The court’s analysis may have implications beyond Maryland. It concluded that digital and nondigital advertising are sufficiently similar for purposes of the Internet Tax Freedom Act. Because Maryland generally does not impose a statewide tax on comparable nondigital advertising, the court held that the digital advertising tax was preempted by federal law.
The decisions also found constitutional problems with the tax’s use of worldwide revenue to establish the $100 million applicability threshold and determine the tax rate. In the Peacock TV decision, the court separately held that the statutory exemptions for certain broadcast entities and news media entities violated the First Amendment.
The Maryland decisions do not bind courts or legislatures in other states, and other states may structure their taxes differently. Still, the court’s reasoning highlights three issues for lawmakers considering similar legislation: different tax treatment of digital and nondigital advertising, reliance on worldwide revenue, and exemptions that require content-based distinctions.
The orders state that any petition for judicial review must be filed in an appropriate Maryland circuit court within 30 days. As that deadline approaches, states considering similar taxes should monitor the Maryland proceedings and evaluate whether their proposals raise the same federal statutory and constitutional concerns.
