DIGITAL AD TAX ARGUED IN MARYLAND FEDERAL COURT CASE

Attorneys in a federal court challenge to Maryland’s first-in-the-nation digital ad tax argued about whether the law is a tax or an unconstitutional penalty targeting Big Tech.

Attorneys for the state of Maryland and a lawyer representing Big Tech gave arguments in a virtual hearing before U.S. District Judge Lydia Kay Griggsby in a case that is being closely watched by other states that are also considering a tax for online ads.

Julia Bernhardt, a Maryland assistant attorney general, defended the law as a legitimate revenue-raising measure approved by the state legislature to raise money for education. Supporters have described it as a necessary step to modernize the state’s tax system.

“It’s not a penalty, and it’s not a regulatory fee,” Bernhardt said of the law, adding: “It benefits the entire public, and that’s the most important factor.”

The law was approved by Democrats who control the legislature, over the veto of Republican Gov. Larry Hogan, to raise an estimated $250 million a year to help pay for a sweeping K-12 education measure to expand early childhood education, increase teacher salaries, boost college and career readiness and help struggling schools. The law was challenged in U.S. District Court in Maryland just days after the veto override last year.