Maryland is first US state to tax digital ad revenue

SAN FRANCISCO – Maryland yesterday became the first US state to tax digital ad money taken in by internet giants.

Legislators in the state Senate mustered enough votes to override a veto by Republican Governor Larry Hogan, who sought to derail the tax on revenue taken in from online ads shown in Maryland.

“It’s all about taxes and no results,” he said in a video posted on Twitter.

“This is not the end of this fight, this is only the beginning. It cannot, and it will not, stand.”

The tax is expected to be challenged in court.

Supporters of the tax, money from which is to be funnelled into education, touted its passage as a victory for schools that have gone underfunded while internet firms raked in fortunes from targeted ads.

Hogan vetoed the bill last year, contending that it will raise taxes on people already struggling due to the pandemic.

A tax bite of up to 10% will be taken from the portion of digital advertising revenue resulting from internet use in the state.

“Maryland will become the first state in the country to make sure big tech pays their fair share while making billions of dollars a year using our personal data to sell digital ads,” said state Senator Bill Ferguson in a Facebook post supporting the bill.

The tax targets companies that make over US$100 million (RM404 million) a year from digital advertising, said Ferguson.

Facebook and Google dominate the digital advertising market, bringing in billions in revenue annually. E-commerce colossus Amazon has been scaling up its digital ad business.

It is estimated that the tax could bring US$250 million into government coffers in its first year. 

Other states are expected to follow suit in taking aim at internet giants that have built financial empires on free services supported by targeted advertising.

Countries including Austria, Britain, France and Spain have pursued digital services taxes.

The administration of United States President Joe Biden has expressed support for a proposed global tax on digital giants like Amazon, Facebook and Google.

The legality of the digital ad tax in Maryland is expected to be challenged in court.

“Maryland now has the dubious honour of being the only state in the country to have ever passed such a flawed tax,” said Robert Callahan, vice-president of the Internet Association trade group.

“At least Maryland businesses and consumers can rest easier knowing that the courts will have the last say on this matter, and that the law, not politics, will decide the outcome.” – AFP, February 13, 2021