Maryland approves the first state tax on digital ads from Facebook, Google

Maryland has passed the U.S.’s first tax on the revenue from digital advertisements sold by companies like Facebook, Google, and Amazon.

David McCabe for The New York Times:

The State Senate voted on Friday to override the governor’s veto of the measure, following in the footsteps of the state’s House of Delegates, which gave its approval on Thursday. The tax will generate as much as an estimated $250 million in the first year after enactment, with the money going to schools.

MacDailyNews Take: Yeah, right. Teachers’ unions is more like it.

See also: Apple CEO blasts teacher unions, says U.S. schools are ‘unionized in the worst possible way’ – February 16, 2007

bitsThe approval signals the arrival in the United States of a policy pioneered by European countries, and it is likely to set off a fierce legal fight over how far communities can go to tax the tech companies…

Maryland’s tax also reflects the collision of two economic trends during the pandemic: The largest tech companies have had milestone financial performances as social distancing moved work, play and commerce further online. But cities and states saw their tax revenues plummet as the need for their social services grew.

Lobbying groups for Silicon Valley companies like Google and Facebook joined other opponents of the law — including Maryland Republicans, telecom companies and local media outlets — in arguing that the cost of the tax would be passed along to small businesses that buy ads and their customers. Doug Mayer, a former aide to Gov. Larry Hogan who now leads a coalition backed by industry opponents of the tax, said at a news conference last week that the law’s supporters were “using this bill to take a swing at out-of-state, faceless big corporations.”

“But they’re swinging and missing and hitting their own constituents in the mouth,” he said.

MacDailyNews Take: Maryland’s tax applies to revenue from digital ads that are displayed inside the state and is based on the ad sales generated. A company that makes at least $100 million a year in global revenue but no more than $1 billion a year will face a 2.5% tax on its ads. Companies – like Facebook and Google – that make more than $15 billion a year will pay a 10% tax.

Maryland’s tax is likely to face court challenges.

Opponents may argue that because the largest tech companies are not based in Maryland, the law will tax activity that originated outside the state, violating the Constitution. They may also argue that the law runs afoul of a federal law that says taxes on digital goods or services must also apply to equivalent physical products.

“It’s tax discrimination,” said Dave Grimaldi, the executive vice president for public policy at IAB, an online advertising trade group. “There will be all manner of challenges as soon as it is enacted.”

MacDailyNews Take: Further breaking an already broken system is stupid.

Online advertising has been broken for approximately a decade. It used to be a way to fund free websites (such as the one you’re currently reading) prior to the rise of Google and Facebook.

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