Maryland Digital Ad Tax Struck Down Over Free Speech

Earlier this year, the United States Chamber of Commerce (Chamber) and three other trade associations initiated court proceedings to halt the enforcement of Maryland's 2021 Digital Advertising Services Tax Bill, which imposes taxes on large tech companies based on their gross revenue from digital ads sold within the state. 

In addition to this, the Bill also prohibits tech companies from passing the tax onto consumers in any form, including a surcharge, fee, or line item on their bills. This was the main point of dispute raised by the Chamber and other trade associations, on which the US Court of Appeals decided on August 15, 2025.

Reason for the Dispute and the Court's Decision

The Chamber and other trade associations viewed the prohibition on tech companies from passing the tax onto consumers in any form as a violation of the First Amendment. More specifically, they argued that these provisions prohibit companies from informing consumers about the newly added tax, thus suppressing their freedom of speech, which they consider unconstitutional.

The three-judge panel ruled that Maryland’s 2021 digital ad tax contains an unconstitutional restriction on free speech, underlying that the ban on informing consumers about the tax shields the lawmakers from public scrutiny. As stated in the ruling, there is a parallel between the 1765 Stamp Act and Maryland’s modern digital ads tax, where both laws restricted public discourse about taxation. 

The introduction of the Stamp Act, which taxed nearly all printed materials in the colonies, led to widespread protest and contributed to revolutionary sentiment by threatening citizens’ ability to express their views on public matters. The Court of Appeals held that Maryland’s tax on internet advertising requires companies to pay the tax without disclosing its impact on pricing to customers, effectively preventing discussion about the tax.

Therefore, the Court of Appeals overturned a 2024 ruling by a District Judge who acknowledged First Amendment concerns but allowed the law to stand, stating that speaking out about taxes is a long-standing tradition among US citizens.

Conclusion

The Court of Appeals accepted the arguments of the Chamber and other trade associations, and overruled the District Court's ruling. Considering that this is not the only case brought against this tax, and that Apple and Meta have taken their case to the Maryland Tax Court to challenge the law, arguing that it violates the federal Internet Tax Freedom Act, the future of Maryland's Digital Advertising Services Tax seems increasingly uncertain. 

Nevertheless, until all court proceedings are concluded and all legal remedies have been exhausted, the battle over these taxes will continue.

Source: US Court of Appeals - Ruling No. 24-1727, VATabout