Maryland Supreme Court Ruling Keeps Digital Advertising Tax Alive . . . For Now

July 26, 2023

By: Jeff Glickman, SALT Partner

At a glance

  • The main takeaway: A Maryland Supreme Court order revived the state’s new Digital Advertising Tax (DAT), the first of its kind in the United States. 
  • Assess the impact: While additional challenges to the DAT are expected, taxpayers that may have held off on complying now need to determine if they owe the tax for the 2022 tax year and any estimated payments for 2023.
  • Take the next step: Aprio’s State and Local Tax (SALT) team can help you determine your DAT obligations under the new regulations and potential options for a refund in the event the tax is found unconstitutional or in violation of Federal law.

Schedule a free consultation today to learn more!

The full story:

On May 9, 2023, the Maryland Supreme Court issued an order vacating a lower circuit court ruling that found the state’s Digital Advertising Tax (DAT) unconstitutional and in violation of the federal Internet Tax Freedom Act prohibiting state and local taxes that discriminated against electronic commerce.1 To be clear, the Maryland Supreme Court did not rule that the tax is valid; rather, it concluded on a procedural matter that the lower circuit court did not have jurisdiction to hear the case because the taxpayer did not exhaust its administrative remedies before filing its lawsuit. Therefore, the order revives the DAT and permits the state to enforce it.

What is DAT?

The DAT is the first of its kind in the United States and is a gross receipts tax on large companies (i.e., those with at least $100 million in global annual gross revenues) that derive revenue from advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising and other comparable advertising services.2 The law defines a digital interface as any type of software that a user can gain access to, including a website, part of a website, or application.3 While the tax is imposed on annual gross revenues from “digital advertising services in the State” of at least $1 million,4 the rate of tax paid is determined by the company’s global annual gross revenues as follows:

  • 2.5% for global annual gross revenues of at least $100 million but not more than $1 billion;
  • 5% for global annual gross revenues of more than $1 billion but not more than $5 billion;
  • 7.5% for global annual gross revenues of more than $5 billion but not more than $15 billion; and
  • 10% for global annual gross revenues exceeding $15 billion.5

A closer look at Maryland’s regulations to DAT

Under Maryland regulations, “digital advertising service in the State” is determined by multiplying the taxpayer’s revenue from the digital advertising services by an apportionment factor. The formula is laid out as follows: the numerator is the number of devices that have accessed the digital advertising services from a location in the State, and the denominator is the number of devices that have accessed the digital advertising services from any location.6 If a device’s location is indeterminable, it is excluded from the numerator and denominator of the apportionment factor.7

To determine the location of a device, the taxpayer shall use the totality of the data within their possession or control that most reliably identifies the device’s location, including both technical information and nontechnical information included in the contract for digital advertising services.8 Technical information may include Internet protocol, geolocation data, device registration, cookies, industry standard metrics and any other comparable information.9

Companies are prohibited from directly passing on the cost of the DAT to a customer who purchases the digital advertising services by means of a separate fee, surcharge, or line-item.10

The DAT is determined on a calendar year basis and the tax return/payment is due on or before April 15 (no extensions are available). In addition, a taxpayer that reasonably expects its gross revenues derived from digital advertising services in the State to exceed $1,000,000 for the calendar year, must make estimated digital advertising gross revenues tax payments as provided on Form 600D.11

The bottom line

While the Maryland Supreme Court ruling keeps the DAT alive, challenges to the DAT are expected to continue, and, in the future, the tax may be found unconstitutional or in violation of Federal law. In the meantime, since the tax became effective for the 2022 calendar year, taxpayers should determine if they owe the tax for that year as well as any estimated payments for 2023.

Aprio’s SALT team can assist taxpayers in determining their obligations under the new DAT regulations and potential options regarding protective refund claims in the event the tax is ultimately found to be unconstitutional or in violation of Federal law. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

This article was featured in the July 2023 SALT newsletter.


1 Comptroller v. Comcast, Case No. SCM-REG-0032-2022, Md. Sup. Ct., May 9, 2023. For more information about the lower court decision, see our article, and for an earlier article providing a high-level summary of the tax, click here.

2 Md. Code Ann. Tax-Gen. § 7.5-101(e)(1). “Digital advertising services” does not include advertisement services on digital interfaces owned or operated by or operated on behalf of a broadcast entity or news media entity. Md. Code Ann. Tax-Gen. § 7.5-101(e)(2).

3 Md. Code Ann. Tax-Gen. § 7.5-101(f).  

4 Md. Code Ann. Tax-Gen. § 7.5-102(a). See instructions to Form 600.

5 Md. Code Ann. Tax-Gen. § 7.5-103.

6 Md. Regs. Code 03.12.01.02(B)(1), (3).

7 Md. Regs. Code 03.12.01.02(B)(2).

8 Md. Regs. Code 03.12.01.02(C)(1), (2).

9 Md. Regs. Code 03.12.01.02(C)(3).

10 Md. Code Ann. Tax-Gen. § 7.5-102(c).

11 Md. Regs. Code 03.12.01.06.

Recent Articles

About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.


Stay informed with Aprio.

Get industry news and leading insights delivered straight to your inbox.

Stay informed with Aprio. Subscribe now.