Digital Ad Tax Voided: $250M Refunds to Apple, Google, Peacock

For legal and regulatory professionals, the Maryland Tax Court's decision is a rare multi-ground invalidation: the court held that a revenue-based digital advertising tax violated federal statutory law and three separate constitutional provisions. The ruling supplies plaintiffs with a template for challenging state digital services taxes while putting revenue counsel for ad-supported platforms on notice that pass-through prohibitions and extraterritorial revenue reach remain vulnerable.

A Maryland Tax Court decision issued Friday, August 14, 2026, has struck down the nation's first tax on digital advertising and ordered state officials to repay money already collected from Apple, Google, and Peacock TV. The court held that Maryland's 2021 digital advertising gross revenues tax violates the federal Internet Tax Freedom Act, the First Amendment, and the commerce and due process clauses of the U.S. Constitution. The ruling is the latest and most comprehensive defeat for a statute that was projected to raise roughly $250 million annually for Maryland's K-12 education overhaul and has been closely watched by other states evaluating similar levies on online ad revenue.

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The law imposed a 2.5% tax on annual gross revenues from digital ads shown in Maryland for companies with more than $100 million in global gross revenues, escalating to 10% for companies with $15 billion or more.

The law imposed a 2.5% tax on annual gross revenues from digital ads shown in Maryland for companies with more than $100 million in global gross revenues, escalating to 10% for companies with $15 billion or more. The design deliberately targeted the largest digital advertising platforms, drawing constitutional challenges from Meta, Amazon, and other Big Tech firms in multiple legal venues. Last year, the U.S. Court of Appeals for the Fourth Circuit already invalidated a portion of the law that prohibited companies from passing the tax through to customers, with Judge Julius Richardson writing that the ban violated free speech. Friday's Tax Court ruling goes further by voiding the tax in its entirety on multiple independent grounds.

The Internet Tax Freedom Act finding is especially significant because that federal statute was enacted to prevent state and local governments from imposing multiple or discriminatory taxes on electronic commerce. A revenue-based tax that singles out digital advertising and applies only to the largest global platforms creates exactly the kind of differential treatment Congress sought to prohibit. By citing the First Amendment, the Tax Court also built on the Fourth Circuit's 2025 reasoning: the law's restriction on telling customers about the tax was a form of speech regulation that could not survive constitutional scrutiny. The additional findings that the tax violated the commerce and due process clauses indicate concerns about the geographic scope of a Maryland tax reaching worldwide digital ad revenue, even when only some ad impressions appear in the state.