On April 6, 2021, Walter Calvert was quoted in Law360 on the difficulties associated with implementing a digital advertising tax. According to the article, Maryland began attracting attention in 2020 with H.B. 732, a bill to establish a special tax imposed on big online companies that sell advertising on their platforms. The General Assembly passed the bill, which was then vetoed by Governor Larry Hogan.
This year, H.B. 732 came back and the General Assembly voted to override the governor's veto. Almost immediately, the law was challenged as a violation of the Internet Tax Freedom Act, which forbids discrimination against electronic commerce, and of the due process and commerce clauses of the U.S. Constitution. The lawsuit has temporarily halted H.B. 732.
A bigger challenge for Maryland and other states proposing to tax digital advertising may lie in actually implementing such a tax, Calvert told Law360. Maryland has proposed sourcing revenue to the state if a digital ad is viewed on a device with a Maryland IP address, but IP addresses don't always accurately reflect the precise location of the person viewing an ad on a device. That makes it difficult to know whether, and how much, income belongs to Maryland, he said.
"It's hard to pin down exactly where the IP address is," Calvert said. "The challenge in the enforcement is the apportionment. That could lead to another round of litigation, if it comes to that."