State Ruling on Md. Ad Tax Adds Uncertainty, Says Chamber

With a Maryland court striking down the state’s digital ad tax, federal plaintiffs challenging the same law urged the U.S. District Court for Northern Maryland to rule quickly on the state banning companies from passing the tax’s cost on to customers. In a Friday letter to the federal court, the U.S. Chamber of Commerce and other plaintiffs attached Anne Arundel Circuit Court Judge Alison Asti’s short Friday order, which was based on her Oct. 17 bench ruling (see 2210170076). The state court’s order (case C-02-CV-21-000509) said the tax violates the U.S. Constitution's supremacy clause and the Internet Tax Freedom Act because the tax is discriminatory; flouts the Constitution's Commerce clause because it discriminates against interstate commerce; and defies the First and 14th amendments “because it singles out the Plaintiffs for selective taxation and is not content-neutral.” Although that decision “was a step in the right direction, its lack of reasoning and the State’s intent to appeal have introduced problematic uncertainty for the regulated public,” the federal plaintiffs told the district court (case 21-cv-00410-LKG). “Companies engaged in digital advertising in this State need firm and final guidance on whether they will have to pay the tax and whether they may say anything about it on their invoices and other customer statements.” The state court’s judgment doesn’t moot the federal case, said the plaintiffs, noting Asti didn’t rule on the constitutionality of the pass-through prohibition. “Plaintiffs’ members have paid estimated taxes under the Act, and the question whether they may identify increased customer pricing with express fees or surcharges related to those estimated payments remains a live issue, regardless of any appeal.” The federal court earlier scheduled Nov. 29 oral argument (see 2209070026).