On October 29, 2021, Chris Moran was quoted in Bloomberg Law on the distinction between taxes and fees in a federal dispute over Maryland’s new digital advertising gross revenues tax. The state has sought to dismiss the lawsuit, arguing that it’s insulated by the Tax Injunction Act (TIA), which prevents courts from enjoining a state tax where “a plain, speedy and efficient” remedy is available in state court.
According to the article, the Maryland legislature enacted a law imposing a tax of up to 10% on the gross revenue from digital ads earned by internet advertisers with annual revenue of at least $100 million. The new tax is scheduled to go into effect January 1, 2022. Big tech challengers are accusing the state of imposing a penalty on social media and search engines for perceived “social ills,” rather than a legitimate tax under the TIA.
A federal judge presiding over the case ordered the Maryland comptroller to file a brief on whether the state’s Digital Advertising Gross Revenues Act constitutes a “tax” or a “penalty,” and whether the state established a timely remedy for legal challenges under the federal TIA.
“The legislature could have drafted the statute to more clearly provide that challenges to the advertising tax would be addressed pursuant to typical refund procedures,” said Moran. “That said, I think the Comptroller did a good job demonstrating in its briefing how it handles claims from several taxpayers regarding the same legal issue.”
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