Court Strikes Down Digital Tax, As Expected
The Duckpin predicted the illegality of the tax before it was ever passed. But Democrats reaction says everything.
Anne Arundel County Circuit Court Judge Allison Asti struck down Maryland’s Digital Advertising Tax:
A judge struck down Maryland’s digital advertising tax Monday in Anne Arundel Circuit Court, ruling that the first-in-the-nation law was unconstitutional.
In a ruling from the bench, Judge Alison L. Asti decided in favor of Verizon and Comcast, which filed a challenge in state court in 2021 against Maryland Comptroller Peter Franchot.
Longtime readers of The Duckpin knew this was coming, as our Mark Uncapher accurately predicted the illegality of the tax before it was even passed last year.
The bills were passed even though legal experts and tax opponents pointed out that Federal courts will likely block implementation, due to a conflict with the federal Internet Tax Freedom Act. This Federal law, signed into law by President Barack Obama in 2016, prohibits states and localities from assessing taxes on internet access and prohibits "discriminatory taxes on electronic commerce."
Furthermore, the state law would face challenges that the tax violates the Commerce Clause of the U.S. Constitution, which prohibits state laws that interfere with interstate commerce. This is because, as the tax is structured to be assessed on global revenues, large multinational businesses are likely to have a significantly higher tax burden in Maryland than Maryland-only providers.
The bill may also violate the First Amendment. In Grosjean v. American Press Co. and Minneapolis Star Tribune Co. v. Commissioner, the U.S. Supreme Court considered the impact of taxes on the news media, ruling that industry-specific taxes violate the First Amendment's speech protections.
Observers of the General Assembly and the Constitutional process always knew that the bill was illegal. But it did not stop Maryland’s legislative Democrats, to whom the Constitution is merely a speedbump in the way of their taxes and handouts.
Senate President Bill Ferguson of Baltimore, who sponsored the legislation, said Monday that he expected the tax would face legal obstacles but that he believed the attorney general would win an appeal in state courts.
“Maryland’s children deserve a world-class 21st-century education system that works for them and is funded appropriately. That’s what this law is all about,” he said in a statement.
And that statement explains everything. Ferguson knew that the tax would face “legal obstacles.” Ferguson knew that the tax was unconstitutional. And yet, he railroaded it through the General Assembly anyway, his actions in his mind justified due to the need to fund the Kirwan Commission recommendations.
Something to keep in mind with three weeks to go before elections of the General Assembly.