Digital Ad Tax Suit in Maryland Becomes Test of States’ Rights

A tax debate in Maryland over Facebook and Google’s biggest revenue stream is setting the stage for broader arguments over state authority to tax a wider swath of commerce occurring over the internet.

The U.S. Chamber of Commerce and three other trade associations filed suit last month to strike down Maryland’s recently passed tax on digital advertisements, arguing the first-of-its-kind levy violates the Internet Tax Freedom Act by imposing “discriminatory taxes” on e-commerce. The action has renewed debate over states’ rights and what the federal government can prevent from being taxed by individual states, according to several lawyers and ...