Maryland digital ad tax struck down: What it means for other states

• In three separate-but-similar rulings, the Maryland Tax Court decided the Digital Advertising Gross Revenues Tax violates the Internet Tax Freedom Act (ITFA), the Dormant Commerce Clause, and the Due Process Clause.
• The court ordered the Maryland Comptroller to refund, with interest, the digital ad taxes paid by the three plaintiffs since 2022. The state has not spent the digital ad tax revenue it collected because of legal challenges.
• The Maryland Comptroller has 30 days to appeal these decisions and is expected to do so.

The Maryland Tax Court issued three separate rulings on Friday, August 14, 2026.

In Apple Inc. v. Comptroller of Maryland (23-DA-OO-0456), the court held that the tax violates 1) ITFA, 2) the Dormant Commerce Clause, and 3) the Due Process Clause of the Fourteenth Amendment.

In Google LLC v. Comptroller of Maryland (23-DA-OO-0649), the court held that the tax violates 1) ITFA, 2) the Dormant Commerce Clause, and 3) the Due Process Clause of the Fourteenth Amendment.

In Peacock TV, LLC v. Comptroller of Maryland (23-DA-OO-0654), the court held that the tax violates 1) ITFA, 2) the Dormant Commerce Clause, 3) the Due Process Clause of the Fourteenth Amendment, 4) the Foreign Commerce Clause, and 5) the First Amendment of the U.S. Constitution and Article 40 of the Maryland Constitution Declaration of Rights.

All three rulings contain the following explanation: “Using a common-sense approach to define and distinguish digital advertising services from nondigital, the court finds that currently, in the advertising industry, in academia, and in Maryland households, the provision of digital advertising services is indistinguishable from the provision of nondigital advertising services; they are even more aligned than ‘similar.’”

The court acknowledged that “this perception may change over time as new technologies, capabilities, and public education develop and prosper.” But for now, it found that to be “the current state of affairs.”

The court ordered Maryland to refund the digital ad taxes paid by Apple, Google, and Peacock TV since 2022, plus interest. However, if the Maryland Comptroller appeals to the circuit court, as expected, the refunds could be put on hold.

The Comptroller of Maryland reportedly collected about $535.5 million in digital advertising tax revenue through July 2026. That revenue was not spent pending legal disputes, a decision that may turn out to be prescient.

Following the decisions, Comptroller Brooke Lierman said he respected but strongly disagreed with the Maryland Tax Court’s decision. His statement suggests the state will appeal: “I will continue to work with the Attorney General of Maryland in defending this important law.”

Likewise, Maryland Senate President Bill Ferguson and House Speaker Joseline Pena-Melnyk issued a joint statement respectfully disagreeing with the ruling and defending the tax. “The General Assembly enacted the Digital Advertising Gross Revenues Tax because Maryland’s tax system should keep pace with a changing economy,” they explained. “As more commerce and advertising moved online, it was appropriate to modernize our tax code so that large digital advertising companies contributed alongside other businesses operating in our state.”

Ferguson added, “We will appeal this ruling.” The state has just 30 days from August 14 to do so.

The Maryland Tax Court rulings may not bode well for the Illinois digital advertising tax or Utah targeted advertising tax, both of which are scheduled to take effect January 1, 2027, or for the Chicago Social Media Amusement Tax (SMAT) that took effect January 1, 2026.

Indeed, the Chicago SMAT is already being challenged, and a complaint filed last month seeks to prevent Utah’s tax from taking effect.

The Maryland decisions could also put Washington state’s new advertising tax on shaky ground. While the tax applies to both “digital and nondigital services related to the creation, preparation, production, or dissemination of advertisements,” Washington specifically exempts out-of-home advertising like billboards and transit ads. A lawsuit alleging the state will tax digital and traditional advertising unequally was filed before the tax took effect.

Finally, the rulings may give pause to the many states that have introduced digital advertising tax legislation, like California, Massachusetts, Michigan, Minnesota, Nebraska, New York, Pennsylvania, Rhode Island, and Tennessee. At a minimum, as this article notes, they’re a cautionary tale for any state seeking to tax electronic transactions “while leaving analogous offline services untaxed.”

Jared Walczak of the Tax Foundation finds the Maryland Tax Court’s ruling to be highly relevant to other states. “No matter what the other details of a digital ad tax’s design, if it only (or almost exclusively) reaches digital advertising, it violates ITFA. That’s the Maryland Tax Court’s ruling, and while Maryland courts certainly do not bind other states’ courts, policymakers should recognize that other courts are likely to reach the same conclusion.”

The Maryland Tax Court decisions are important but don’t necessarily put Maryland’s digital advertising tax to rest. The state will likely appeal the rulings, and if those efforts also fail, the Legislature could try to find a less controversial way to tax digital advertising. Hawaii and New Mexico offer a potential path forward by generally taxing all forms of advertising, not just digital ads.

No matter what ultimately happens in Maryland, states will likely continue to seek ways to generate tax revenue from online advertising, data collection (like Kentucky and New Jersey), or other activities related to the digital economy.