Maryland Clarifies Digital Ad Tax Scope and Definitions

The Maryland Comptroller adopted amendments that clarify and narrow the practical scope of the state’s Digital Advertising Gross Revenue (DAGR) tax by reinforcing key interpretive positions that had previously appeared in administrative guidance. At the same time, the Comptroller amended the regulations on sales tax for technology services by building on and formalizing positions previously outlined in administrative guidance. 

Key Clarifications Provided by Comptroller

Instead of introducing a new framework, Maryland regulators decided to provide greater clarity and consistency in areas that had created uncertainty for taxable persons. Therefore, the amended regulations confirm that two cumulative criteria must be met for advertising to fall within the taxable base. Advertising must be delivered programmatically, meaning through automated, data-driven processes, and it must be visually conveyed to users.

The amended regulations further clarify what qualifies as “other comparable advertising services,” a category that had previously been somewhat ambiguous. Examples of this category of services include traditional display advertising, as well as more advanced formats such as programmatic video advertising and advertising delivered through multichannel video programming distributors, including cable, satellite, and fiber-optic systems.

Furthermore, the Comptroller provided clarification on multiple-point-of-use (MPU) certificates, which are relevant when services are used across different jurisdictions. Additionally, amendments address the treatment of bundled transactions, where taxable and non-taxable elements are sold together, and expand the definition of a lease. Additional guidance is also provided for items sold in connection with exempt services, to help taxable persons determine when those items may be subject to tax.

Conclusion

The explanations and clarifications provided by the Maryland Comptroller through amended regulations provide greater clarity and practical guidance to taxable persons navigating both the DAGR tax and the sales tax on technology services. The combination of codifying prior administrative positions and elaborating on key concepts reduced interpretive ambiguity and compliance risk in Maryland.

Source: PwC