![]() ![]() Immediately, digital advertisers must determine if their 2023 digital advertising service receipts in Maryland will exceed $1 million if so, then the businesses must quickly file a return to mitigate penalties. The Supreme Court’s remand of this case to the Circuit Court for Anne Arundel County with directions to dismiss will require companies whose services meet the broad definition of “digital advertising services” to take steps to determine whether they will be subject to the tax’s various filing requirements. In response, the Comptroller asserted that the exception would not be available in such circumstances the only way for a person to challenge such a tax would be to pay it and seek a refund or wait to be assessed-“s difficult as that may be to handle or swallow.”Īnd with this decision, constitutionally suspect taxes will be allowed to survive while taxpayers and administrators work through a laborious administrative process to challenge them. This was so, according to the Comptroller, even if a tax was enacted on transparently unconstitutional grounds-the Circuit Court asked, for example, about a hypothetical tax aimed solely at Native Americans. The following lines from the taxpayers' initial brief encapsulate the impact:Īt the hearing on Defendant’s motion, the Comptroller acknowledged the existence of the constitutional exception, but argued that it applied only to “ministerial” or “mechanical” constitutional violations, such as an improper bill title… He argued it was not available to challenge the legality of a tax on substantive grounds. The Court’s ruling could have a significant impact on how tax cases are litigated in Maryland. On May 9, 2023, just four days after oral argument before the circuit court, the Supreme Court of Maryland issued a Mandate, vacating the circuit court’s order granting the taxpayers’ motion for summary judgment, stating that “the Circuit Court for Anne Arundel County lacked jurisdiction over this action because the appellees failed to exhaust their administrative remedies.” The Mandate notes that its rationale will be stated later in an opinion to be filed by the Court. The Comptroller’s primary argument on the appeal was that the taxpayers were precluded from bringing a court challenge regarding the constitutionality of the Digital Ad Tax before exhausting administrative remedies. The Comptroller’s Office appealed the circuit court’s judgment, and the Supreme Court of Maryland agreed to hear the case. Constitution’s Commerce Clause and First Amendment. In October 2022, a Maryland circuit court judge struck down Maryland’s first-in-the-nation Digital Advertising Gross Revenues Tax (“Digital Ad Tax”), denying the Comptroller of Maryland’s motion to dismiss, granting plaintiffs’ motion for summary judgment, and declaring the Digital Ad Tax violated the federal Internet Tax Freedom Act and the U.S. Supreme Court of Maryland Vacates Maryland Circuit Court’s Order that Ruled the State’s Digital Advertising Gross Revenues Tax Invalid on Procedural Grounds Background ![]()
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