Digital advertising tax sued in Maryland federal court case – CBS Baltimore

ANNAPOLIS, Md. (AP) – Attorneys in a federal trial challenging Maryland’s first nationwide digital advertising tax debated Thursday over whether the law is a tax or an unconstitutional penalty aimed at Big Tech.

Attorneys for the state of Maryland and an attorney representing Big Tech made the arguments in a virtual hearing before U.S. District Judge Lydia Kay Griggsby in a case that is being closely watched by other states. is also considering taxing online advertising.

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Julia Bernhardt, an assistant attorney general of Maryland, defended the law as a legal revenue increase measure approved by the state legislature to raise money for education. Advocates 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 act was passed by the Democrats, who control the legislature, through a veto by Republican Governor Larry Hogan, to raise an estimated $250 million a year to help pay for a Extensive K-12 education measures to expand early childhood education, increase teacher salaries, increase college and career readiness, and help struggling schools. The act was challenged in US District Court in Maryland just days after it gained a veto last year.

Attorneys representing the American Chamber of Commerce, the Internet Association, NetChoice and the Computer and Communications Industry Association are challenging the law. They say it violates the federal Internet Tax Freedom Act, which prohibits discrimination against e-commerce, as well as other federal laws.

Michael Kimberly, who represents the plaintiffs, argued that the law was narrowly regulated, punitive and “extremely burdensome”. He said it was specifically designed to have the biggest impact on companies like Facebook, Google and Amazon.

Kimberly cited criticism from Maryland lawmakers, who accused Big Tech of spreading disinformation and hate speech as a sign that the law was intended to be punitive. He also noted that the next legislator bill was passed last year, exempting broadcasting companies and news organizations.

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“The explanation is clear in legislative history,” Kimberly said. “That’s because they’re not a company that legislators understand to be engaging in reprehensible behavior.”

He told the judge the takeaway was that you could be in the business of selling digital ads if you’re a small company and you don’t have too much influence.

“This business is okay if you are a broadcasting company or a news organization, but if you are Big Tech it is not okay, and once you have too much influence you spread hate speech. hostile, we will punish you for that,” Kimberly said. “That’s clear in every element of this law.”

When the judge questioned where that language could be found, Kimberly said it was part of legislative history and comments made by the sponsor of the digital advertising tax law, Maryland Senate President, Bill Ferguson.

Griggsby said while she understands that’s one person’s point of view, state attorneys general have made it pretty clear that the money raised will go to education and that there’s nothing in the statutes that says attack technology companies.

Kimberly said the record is clear that the tax is designed to “overcome these negative externalities by subsidizing education to ensure that children are more tech-savvy.”

The law would tax the sales affected companies make on digital advertisements displayed in Maryland. The tax rate will be 2.5% for businesses with a total annual turnover of $100 million; 5% for companies with revenue of 1 billion USD or more; 7.5% for companies with revenue of $5 billion or more and 10% for companies with revenue of $15 billion or more.

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Jake Nichol

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