On August 14, 2026, the Maryland Tax Court issued a series of decisions posing a major legal challenge to Maryland's Digital Advertising Gross Revenues (DAGR) tax. In three separate cases involving Apple, Google, and Peacock TV, the Court granted summary judgment to the companies, concluding that the tax is unconstitutional on several grounds.

Impact of Tax Court’s Decisions

The Court found that the DAGR tax violates the Internet Tax Freedom Act (ITFA), the dormant Commerce Clause, and the Due Process Clause. In other words, the Court found the tax discriminates against interstate digital commerce and fails to meet constitutional standards

In one of the cases, the Court also found that Maryland’s exemption for broadcast news media violates the First Amendment because the tax treatment effectively depends on distinctions involving protected speech. However, the Court separately rejected a challenge based on the Commerce Clause’s treatment of foreign commerce. Consequently, the Court overturned the Maryland Comptroller’s denial of the companies’ 2022 tax-year refund claims. Apple, Google, and Peacock were therefore awarded refunds of the disputed DAGR tax, together with applicable interest.

From a broader perspective, the Court's decisions are particularly significant because they are the first rulings to examine the fundamental validity of the DAGR tax on its merits. Earlier processes had not reached the substance of the constitutional challenges. In 2023, the Supreme Court of Maryland dismissed the previous circuit Court case because the plaintiffs had not first exhausted the required administrative remedies.

Following that decision, the companies submitted refund claims for the DAGR tax they had paid, but the Maryland Comptroller denied those claims. The companies then appealed to the Tax Court, leading to the August 14, 2026 decisions in which the Court ruled in their favor.

Conclusion

The Comptroller can still seek judicial review in circuit Court within 30 days of the Tax Court decisions. Therefore, businesses should closely monitor whether the Comptroller seeks judicial review in circuit court, as an appeal could prolong uncertainty regarding the validity and future application of the DAGR tax. 

In the meantime, digital advertising service providers should review their potential exposure and consider whether they may be entitled to refunds of DAGR tax previously paid, taking into account the generally applicable three-year limitation period. In addition, businesses should consider the potential financial impact of the rulings.