Five years after Maryland became the first state in the nation to impose a tax specifically on digital advertising, the Maryland Tax Court has struck it down. The August 2026 ruling found that Maryland’s Digital Advertising Gross Revenues Tax violated the federal Internet Tax Freedom Act and constitutional protections involving interstate commerce and due process.
The ruling may not be the final chapter, as Maryland could continue to challenge the decision. But regardless of what happens next in court, there is an important lesson Maryland policymakers should take from this: If advertising is going to be taxed, tax advertising fairly. Don’t single out technology.
An Ad Is an Ad
Consider two Maryland businesses trying to reach exactly the same customer. One buys a billboard along I-95, while another buys a digital display ad targeted to people traveling along I-95. Both businesses are advertising, both are trying to influence a consumer, and both are spending marketing dollars to grow their businesses. Why should the tax treatment change because one advertisement is printed on a physical sign and another is delivered to a screen?
The same question applies to television, radio, newspapers and other traditional media. Maryland’s Digital Advertising Gross Revenues Tax didn’t create a tax on advertising generally; it created a tax specifically on digital advertising. That distinction matters.
Technology Shouldn’t Determine Tax Policy
When Maryland enacted the tax in 2021, the intention was largely to generate revenue from some of the world’s largest technology companies. But digital advertising isn’t synonymous with Big Tech. Today, digital advertising is simply advertising, and businesses of every size depend on it.
Small businesses use search advertising to find customers. Local restaurants use social media. Car dealerships use streaming television. Tourism organizations use mobile advertising. Nonprofits use digital campaigns to raise awareness. Local media companies sell digital advertising alongside their traditional products. The line between “traditional media” and “digital media” becomes less meaningful every year.
A television station can sell a traditional broadcast commercial and streaming advertising. A newspaper can sell a print advertisement and digital advertising. A radio company can sell terrestrial radio spots, streaming audio and digital display. They are all competing for the same advertising dollars and often reaching the same consumers.
Creating a special tax based on the technology used to deliver an advertising message doesn’t reflect how the modern advertising industry actually works.
We Raised This Concern in 2021
When Maryland enacted the tax five years ago, we wrote about our concerns at Enradius in our original article, “Taxation With Representation.”
Read our original 2021 article: Taxation With Representation
At the time, I wrote, “Even though the intention is to target big businesses like Google and Facebook, the taxes will trickle down to small businesses like us.” Five years later, that concern looks particularly relevant.
Large technology companies don’t operate separately from the rest of the advertising economy. Advertising agencies, publishers and businesses purchase media and technology from these companies every day. When costs increase upstream, some portion of those costs inevitably travels downstream.
That is one of the realities that gets lost when a tax is described as targeting “Big Tech.” A policy may legally impose a tax on a multibillion-dollar corporation, but that doesn’t necessarily mean the corporation ultimately bears the entire economic cost. Those costs can be passed through the advertising ecosystem to agencies, advertisers and ultimately the local businesses buying advertising. We have held the burden of this tax as well and didn’t pass that cost back to our clients.
The Court’s Ruling Highlights the Problem
The Maryland Tax Court concluded that the state’s tax violated the federal Internet Tax Freedom Act, which prohibits discriminatory taxation of electronic commerce. That gets directly to the fundamental problem with Maryland’s approach: the tax treatment was determined in large part by how an advertisement was delivered, rather than simply by the economic activity taking place.
If Maryland believes advertising should generate additional tax revenue, policymakers should have that debate. Maybe advertising should be taxed, and maybe it shouldn’t. But if it is going to be taxed, the rules should be applied consistently across the industry.
A television commercial shouldn’t receive fundamentally different treatment from a streaming television commercial simply because one travels through the internet. A traditional billboard shouldn’t receive preferential treatment simply because a competing advertisement appears on a mobile device. A print publisher and a digital publisher are both selling advertising to businesses that want to reach an audience.
These distinctions become even harder to justify as media companies themselves become increasingly digital.
A Media Company Is No Longer Just One Type of Media
The advertising industry of 2026 looks very different from the advertising industry of even a decade ago. Broadcasters operate websites and streaming platforms. Radio companies sell streaming audio and podcasts. Newspapers sell digital subscriptions and online advertising. Billboard companies operate digital out-of-home networks. Agencies routinely combine all of these channels into a single campaign.
The consumer doesn’t necessarily distinguish between “traditional advertising” and “digital advertising,” and increasingly neither does the advertiser. A business has a marketing budget and decides how to invest it across the channels most likely to reach its customers.
Tax policy should recognize that reality rather than creating an artificial distinction based on the technology carrying the advertisement.
Don’t Tax the Technology
Maryland deserves credit for attempting to modernize its tax system for an economy that has changed dramatically. But modernization shouldn’t mean creating a special tax for whichever technology happens to be growing the fastest. Technology will continue changing, and advertising will continue changing with it. Today’s digital display ad, connected television commercial or streaming audio placement will eventually be joined by advertising formats we haven’t invented yet.
Tax policy shouldn’t have to chase every new technology. Instead, policymakers should determine what economic activity they intend to tax and then establish rules that treat companies competing in that market consistently.
If Maryland wants to tax advertising, then let’s have that conversation. Tax broadcasters, billboards, traditional media and digital media equally — or don’t tax advertising at all.
What shouldn’t happen is choosing one delivery method and making it the target.
The fairest tax system isn’t one that decides which advertising technology should win or lose. It’s one that recognizes that an ad is an ad and treats businesses competing for the same advertising dollars equally.
