Tech Industry Challenges Maryland Online Ad Tax

WASHINGTON -- Groups representing major technology companies filed a lawsuit Thursday challenging Maryland's new online advertising tax, contending it is an improper levy on the internet.

The suit in U.S. District Court in Maryland challenges the state's recently enacted gross-receipts tax on digital advertising revenue as unconstitutional and illegal under a federal internet tax moratorium.

The plaintiffs include the U.S. Chamber of Commerce, the Internet Association, NetChoice and the Computer and Communications Industry Association. Big tech companies including Facebook Inc., Alphabet Inc.'s Google unit and Amazon.com Inc. are represented by the groups.

The suit will be closely watched as other cash-strapped states look to the growing online economy as a new source of tax revenue.

Representatives of the tech companies contend that the tax will unfairly hit small businesses that depend on the internet during the coronavirus pandemic.

"In light of the current pandemic and economic uncertainty, increasing taxes on services used by small businesses to keep themselves running is a particularly poor and ill-timed policy," said Caroline Harris, vice president for tax policy at the U.S. Chamber.

Maryland legislators who pushed for the tax argued that big online advertising companies haven't been contributing enough in the state.

"At a time when Maryland's budget is being impacted in unforeseen and astronomical ways due to COVID-19, Maryland families and small businesses can foot the bill, or big tech can start paying their fair share," Maryland Senate Democrats tweeted a few days ago.

Write to John D. McKinnon at john.mckinnon@wsj.com


  (END) Dow Jones Newswires
  02-18-21 1538ET
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