On March 4, 2022, the United States District Court for the District of Maryland partially dismissed a challenge to the Maryland Digital Advertising Gross Revenues Tax.
- The plaintiffs asserted that the Tax violates the Internet Tax Freedom Act and the Commerce and Due Process Clauses of the United States Constitution.
- The federal court held that the Tax Injunction Act applied and, therefore, the court did not have jurisdiction to hear a challenge to the Tax.
- However, the court agreed to hear the First Amendment and Commerce Clause challenges to the Tax’s “anti-pass-through” provision.
- The Tax contains a provision that prohibits the taxpayer 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.” Code Ann., Tax-Gen. § 7.5-102(c).
- But the Tax does not contain any express penalties for violating the anti-pass-through provision.
- The court determined that a challenge to this provision does not fall within the Tax Injunction Act because it does not involve a challenge to the assessment, levy, or collection of the Tax.
Chamber of Commerce of the United States of America, et. al., v. Franchot, No. 21-cv-00410-LKG (D. Md. Mar. 4, 2022).