A lobbying firm representing some of the largest online tech companies filed a federal lawsuit Feb. 18 against the state of Maryland over the first digital ad tax passed in the United States.
The Internet Association, which includes members like Amazon, Facebook, and Google, alleges that the Maryland tax is unconstitutional because it violates the Commerce Clause. The United States Chamber of Commerce is also listed as a plaintiff on the lawsuit.
— Internet Association (@InternetAssn) February 18, 2021
The Maryland digital ad tax would raise about $250 million a year by taxing firms that make over $100 million in digital advertising revenue, according to the Washington Post. The Maryland state legislature overrode a veto by Republican Gov. Larry Hogan, who was concerned about the law’s constitutionality. The tech companies argue that the law “burden[s] and penaliz[es] purely out-of-state conduct and interfering with foreign affairs.”
Democratic Maryland Attorney General Brian Frosh explained in a 2020 letter to Hogan that he believed the law could be struck down on First Amendment or Commerce Clause grounds. However, the legislature ignored that analysis, because the bill is part of “a conversation we need to be having nationally,” Democratic Senate President Bill Ferguson told the Washington Post. (RELATED: Some Democrats Eye Chance For Big Tech Regulation Under Biden)
Tech companies are struggling with the prospect of more regulation. Democrats and Republicans have recently offered proposals that would roll back Section 230, which offers liability protections for online content hosts. Facebook announced on Feb. 17 that it would no longer allow news stories published by Australian media companies to be shared, in response to a law that would require it to pay media companies for the content.