Summary
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On 14 August 2026, the Maryland Tax Court invalidated the state’s Digital Advertising Gross Revenues Tax in separate proceedings involving Apple, Google and Peacock TV. The court reversed the Maryland Comptroller’s rejection of the companies’ refund claims and ordered repayment of the tax collected from them, together with interest. [caltax.org], [marylandmatters.org]
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The court found that taxing digital advertising while leaving comparable non-digital advertising untaxed violated the federal Internet Tax Freedom Act. It also concluded that the rate structure, which uses a taxpayer’s worldwide annual revenue, improperly increased Maryland tax liabilities by reference to economic activity occurring outside the state. [caltax.org], [wsls.com]
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Businesses within the tax’s scope should monitor the anticipated appeal, preserve relevant tax and sourcing records, and review refund opportunities and financial-statement positions. The decisions could also influence digital advertising tax proposals in other states, although the Maryland rulings remain subject to further judicial review. [finance.yahoo.com], [marylandmatters.org]
Article
On 14 August 2026, the Maryland Tax Court struck down Maryland’s Digital Advertising Gross Revenues Tax in three cases brought by Apple Inc., Google LLC and Peacock TV, LLC. The court reversed the Comptroller of Maryland’s denial of the companies’ refund claims and directed the state to refund the amounts paid, with interest. The three challenges concerned tax paid for 2022, the first year for which Maryland collected the levy. [caltax.org], [marylandmatters.org]
Maryland’s first-in-the-nation tax applies to gross revenue attributable to digital advertising services in the state. Businesses with at least USD 100 million in global annual gross revenue are potentially within scope. Rates range from 2.5% to 10%, with the applicable percentage increasing according to the taxpayer’s total worldwide annual revenue and reaching 10% for businesses with global revenue of at least USD 15 billion. [usnews.com], [mediapost.com]
The court held that the tax violates the federal Internet Tax Freedom Act, which prohibits discriminatory taxation of electronic commerce. In the court’s view, digital and non-digital advertising are sufficiently comparable services, making Maryland’s taxation of digital advertising, while comparable offline advertising remains untaxed, impermissibly discriminatory. The court rejected attempts to distinguish taxable digital advertising by reference to features such as programmatic delivery or visual presentation. [caltax.org], [marylandmatters.org]
The court also found violations of the dormant Commerce Clause and the Due Process Clause. Because the graduated rate is determined by worldwide revenue, additional economic activity outside Maryland can increase the effective tax burden imposed on revenue attributed to the state. The court considered that structure insufficiently apportioned and discriminatory against interstate commerce. In the Peacock TV decision, it additionally held that exemptions for certain news media and broadcast entities violated the First Amendment, although Peacock’s Foreign Commerce Clause argument was rejected. [caltax.org], [wsls.com]
The decisions do not necessarily represent the final outcome. Maryland Comptroller Brooke Lierman stated that she strongly disagreed with the rulings and would continue working with the Maryland Attorney General to defend the law. Maryland had reportedly collected approximately USD 535.5 million through July 2026, with the proceeds segregated pending resolution of the litigation. [marylandmatters.org]
Affected taxpayers should monitor any appeal, evaluate whether refund claims or protective filings remain available, and retain documentation supporting Maryland revenue attribution and tax payments. Businesses should also consider the accounting impact of the decisions, including uncertain tax positions and potential refund receivables. More broadly, the reasoning may be relevant to other US states considering digital advertising or digital services taxes, particularly measures that differentiate between online and offline activity or calculate liability using worldwide revenue. [finance.yahoo.com], [caltax.org]
Source Links
- Maryland Tax Court: Decisions database [taxcourt.m…ryland.gov]
- Maryland Matters: Digital ad sales tax struck down, 14 August 2026 [marylandmatters.org]
- California Taxpayers Association: Court Strikes Down Maryland’s Digital Advertising Tax, 14 August 2026 [caltax.org]
- Associated Press via U.S. News: Maryland Tax Court Voids Digital Ad Tax, 14 August 2026 [usnews.com]
Other articles
Maryland Digital Ad Tax Pass-Through Ban Struck Down by 4th Circuit
- Maryland’s digital advertising gross revenues tax began in 2022 and uses a progressive 2.5%–10% rate on in-state digital ad revenues.
- It applies to companies with at least $100 million in global annual gross revenues and $1 million in Maryland gross revenues.
- The 4th Circuit struck down the law’s pass-through ban, ruling it violates the First Amendment.
- The tax itself still remains in effect.
Source: taxfoundation.org
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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