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Associations Concerned as Digital Ad Tax Bills Proliferate at State Level

Companies are challenging a slew of new tax bills arising in statehouses

With the COVID-19 pandemic exerting enormous budget pressure on state and local governments, more states under tight fiscal restraints are looking to raise revenue by taxing online advertising.

Taxing internet ads could raise a lot of money, but business groups strongly oppose the proposals, citing free speech concerns and the negative impact the tax would have on businesses hard hit by the ongoing pandemic and on news organizations that rely heavily on revenue from digital ads.

Leading the way on digital advertising tax plans is Maryland, where Democratic state legislators came up with a proposal at the beginning of last year to levy as much as a 10 percent excise tax on revenue companies receive from selling digital ads that target Maryland IP addresses. Last spring, Maryland Gov. Larry Hogan (R) vetoed the proposed ad tax, which he said was “misguided” and would likely be passed along to Maryland consumers. But earlier this month, state lawmakers adopted the tax, overriding the governor’s veto, seeking to raise about $250 million a year to pay for local education reform initiatives.

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