On August 15, 2025, the United States Court of Appeals for the Fourth Circuit held that a Maryland statutory provision prohibiting sellers from itemizing the digital advertising tax (DAT) on their invoices violates the First Amendment. As readers are likely aware, the DAT is imposed on gross revenues from digital advertising services in Maryland. After originally enacting the tax over the governor’s veto in 2021, the legislature subsequently passed a provision that prohibited sellers from “directly pass[ing] on the cost of the tax … to a customer who purchases the digital advertising services by means of a separate fee, surcharge, or line-item.” The U.S. Chamber of Commerce and trade associations sued in federal court, arguing that the provision is a content-based restriction on speech that forbids the taxpayers from explaining the tax to their customers.
The Fourth Circuit agreed, finding that the pass-through impermissibly regulates protected speech. Specifically, the court interpreted the DAT as forbidding three specific ways of speaking to its customers about passing on the cost of the tax—that is, noting a separate cost on the customer’s bill—while allowing taxpayers to explain the increased prices by other means. Additionally, the court found that the pass-through provision’s speech regulation is content-based and therefore subject to at least intermediate judicial scrutiny, which it fails. Accordingly, the Fourth Circuit held the pass-through provision of the DAT is “unconstitutional in all of its applications” and thus facially violates the First Amendment. The Fourth Circuit remanded the case back to the District Court to determine the appropriate remedy. Meanwhile, litigation related to the entire DAT’s constitutionality brought by other taxpayers is still pending in the Maryland Tax Court.