ANNAPOLIS, MD – ANNAPOLIS, MD (AP) – Maryland’s supreme court on Tuesday reversed a lower court ruling that said the state’s first tax in the country on digital advertising was unconstitutional. Case.
In an order, Chief Justice of the Supreme Court of Maryland, Justice Matthew Fader, remanded the case back to the Anne Arundel County Circuit Court with instructions to dismiss. He noted that the plaintiffs failed to exhaust administrative remedies through the state’s tax court – reasons to be explained in a subsequent opinion. The four-page order does not pass any judgment on the constitutionality of the law.
Last year, a circuit court ruled that the tax on digital advertising violates the federal Internet Tax Freedom Act, which prohibits discrimination against electronic commerce. The court also held that the law violates the US Constitution’s prohibition on state interference with interstate commerce.
In a case that is being closely watched by other states that have levied similar tax burdens for online ads, Maryland’s comptroller ordered Verizon Media Inc. and appealed the decision in a case brought by Comcast.
The Supreme Court of Maryland issued its order on Friday after hearing arguments from attorneys in the case.
Maryland Attorney General Anthony Brown praised the court’s decision, saying the digital advertising tax provides significant funding for a sweeping education reform law known as Maryland’s blueprint for the future.
“I commend the Supreme Court for acting quickly because the revenue generated by this tax will help us provide our children with the best possible education for success,” Brown said in a statement. “Taking digital advertising will support our collective goal of transforming schools across the state. This will help level the playing field so that under-served communities have access to the quality educational opportunities afforded by our highest performing schools.
In Friday’s arguments, Julia Bernhardt, an assistant attorney general, said the plaintiffs sought to circumvent administrative procedures the state has in place.
“This Court has repeatedly held that constitutional claims have to be presented to the tax court. In case after case, in almost every case involving a constitutional challenge to a state tax, since the inception of the tax court That’s how it unfolded,” Bernhardt said.
Jeffrey Friedman, attorney for the plaintiffs, argued that there was a constitutional exception that applied to this case.
“It only applies, as this court has repeatedly described, to a situation where the entirety of the statute is invalid. In this case, it is invalid because it violates federal law,” he said Friday. told the court.
Maryland lawmakers overruled then-Gov. Larry Hogan’s veto of digital advertising tax measure to pass law in 2021. The state estimates the tax could raise about $250 million per year to help pay for the comprehensive K-12 education measure.
The law imposes a tax on the revenue that affected companies make from digital ads served in Maryland.
Lawyers for big tech companies like Facebook, Google and Amazon have argued that the law unfairly targets them. It would impose a tax based on global annual gross revenue for companies that earn more than $100 million globally.