Maryland Comptroller Issues Final MD Digital Ad Tax Regulations

On December 3, Maryland Comptroller Peter Franchot issued final regulations for the nation’s first digital advertising tax. The state’s digital advertising tax and its regulations are considered by many in the industry to be highly controversial and challenging to implement.

The final regulations were adopted almost entirely as proposed, with just two minor changes that the Maryland Attorney General certified as non-substantive. Specific changes to the proposed regulations concern the information that may be used to determine the location of a device including:

• Regulation .02(C): Amendment changes “both technical information and the terms of the underlying contract” to “both technical information and nontechnical information included in the contract.”
• Regulation .02(C)(2): Amends the non-exhaustive list of technical information to include “industry standard metrics.”

Significant and fundamental questions and concerns submitted as part of the comments were not addressed by the Comptroller in adopting the final digital ad tax regulations. The 4As along with many other advertising industry partners submitted comments on the proposed regulations. The tax is subject to multiple lawsuits (both state and federal court) and pending a court order to the contrary is scheduled to take effect beginning January 1, 2022, with the first filing obligation for large taxpayers in April 2022.

Important for agencies, earlier this year the legislation’s lead Senate sponsor and President of the Maryland Senate, Bill Ferguson (D-46), clarified that he doesn’t believe that the tax would be levied against a company reselling ad space to a marketer client; instead, he explained that the legislative intention of the bill is to tax the digital company selling the original advertising space (i.e. Facebook, Google, etc.). The 4As Government Relations team will continue to advance opportunities to codify this specific exemption through clean-up legislation or future official administrative interpretations.

For more information, please contact Alison Pepper at [email protected].