Fourth Circuit Grapples With Maryland Digital Ad Tax Challenge

A Fourth Circuit judge grilled an attorney defending Maryland’s digital advertising tax at oral arguments Wednesday about whether the measure improperly targeted a small number of tech giants.

“I understand you have an argument that it’s an extremely narrowly tailored tax, which sets the rate based on extraterritorial conduct and taxes gross receipts,” Judge Julius N. Richardson told Maryland Assistant Attorney General Julia Doyle Bernhardt. If no other Maryland tax has those characteristics, it suggests “this isn’t a tax, it’s a hammer,” he said.

Richardson was driving at whether the levy is a penalty disguised as a tax, which can’t ...