First Suit Filed Over Maryland’s Digital Ad Tax

By Lauren Loricchio
TaxNotes State
Feb. 19, 2021


Andrew Appleby, assistant professor at the Stetson University College of Law, observed that one interesting procedural twist related to the suit is that it was filed in federal court, which many state tax practitioners perceive to be a fairer forum than a state court or administrative body.

“Most would expect a federal court to be more likely than a state court to strike down a state statute, especially based on federal preemption. The hurdle is the Tax Injunction Act, which generally bars federal courts from adjudicating state tax cases,” Appleby said.

“The complaint asserts that the Maryland ad tax is not actually a tax, but instead a punitive fee or assessment (and there is at least a colorable argument for that assertion based on the structure of Maryland’s tax and the legislative history). If the federal court agrees, it would be able to decide the substance of this case,” he added.

This article was originally published on the TaxNotes State website on Feb. 19, 2021, with the headline, “First Suit Filed Over Maryland’s Digital Ad Tax.”