In a significant development for advertising technology businesses, the Maryland Tax Court has invalidated Maryland’s Digital Advertising Gross Revenues Tax, holding that the tax is preempted by federal law and violates the Commerce and Due Process Clauses of the U.S. Constitution. The August 14, 2026 decisions in Apple Inc. v. Comptroller of Maryland, Google LLC v. Comptroller of Maryland, and Peacock TV, LLC v. Comptroller of Maryland require Maryland to refund taxes paid by the companies, together with interest.

Maryland’s digital advertising tax, enacted in 2021, was the first state tax specifically targeting revenue from digital advertising services. The tax applied to companies with $100 million of global annual revenue or more at rates ranging from 2.5% to 10% (depending on worldwide revenue) of the portion of revenue derived from in-state digital advertising services.

The Maryland Tax Court found that Maryland’s digital advertising tax violates both the U.S. Internet Tax Freedom Act (“ITFA”) and the U.S. Constitution. Applying ITFA’s prohibition on discriminatory taxes targeting electronic commerce, the court concluded that digital and traditional advertising are effectively “indistinguishable,” making it unlawful to tax digital advertising services while exempting comparable non-digital advertising services. The court further held that the tax violates the dormant Commerce Clause and the Due Process Clause because it ties tax rates to a company’s global, rather than its Maryland, revenue, resulting in a tax that is neither fairly apportioned to in-state activity nor sufficiently connected to the company’s Maryland activity.

These rulings represent the latest setback for Maryland’s digital advertising tax. In 2025, the U.S. Court of Appeals for the Fourth Circuit struck down a separate provision that prohibited taxpayers from separately itemizing the tax as a surcharge to customers, concluding that the restriction violated the First Amendment because it regulated how businesses could communicate price increases resulting from the tax.

The impact of the Maryland decisions may extend well beyond the state. Illinois recently enacted a 10% tax on gross receipts from digital advertising, effective January 1, 2027, and Utah has adopted a targeted advertising tax that will also take effect in 2027. Both measures have drawn comparisons to Maryland’s approach, and states considering similar taxes will likely examine the Maryland Tax Court’s analysis closely, particularly its conclusions under ITFA.

The Maryland Tax Court’s decision is unlikely to be the final word. 

Maryland is expected to appeal, and the case could ultimately make its way to the U.S. Supreme Court. In the meantime, the ruling serves as an important reminder that states seeking to tax the digital economy (such as companies providing digital advertising services) must navigate significant constitutional and federal statutory constraints, and businesses operating in the digital advertising space should continue to monitor developments in the states exploring similar revenue-raising measures.