BALTIMORE — A big development in ongoing litigation as it relates to Maryland's controversial digital ad tax.
The 2021 law targets big tech companies by imposing a tax on money they generate from selling digital advertising in Maryland.
Under the law digital companies making more than $100 million in global gross annual revenue are taxed a rate of 2.5 percent.
Tax rates can go high as 10 percent for companies making $15 billion or more.
The law was originally pitched as a way to raise up to $250 million annually for the Blueprint for Maryland’s Future education program.
While the legislation itself overcame a veto from then Governor Larry Hogan, but has since been subjected to several lawsuits.
One particular provision, however, has faced extra legal scrutiny.
An amended version of the bill includes what's known as a "pass-through provision."
In short, the provision prohibits digital ad companies from passing on tax costs to its customers in the form of a separate fee, surcharge, or line-item.
A group of trade associations sued over the provision, alleging the goal of Maryland Democratic lawmakers was to shield themselves from criticism and political accountability, by forbidding digital companies from explaining to their customers the real reason for higher pricing.
After initially surviving a challenge in the Federal District Court of Maryland, a unanimous three judge panel on the U.S. Fourth Circuit Court of Appeals struck the provision down on August 15, 2025, over freedom of speech violations guaranteed by the Constitution's First Amendment.
In ruling against Maryland, the appeals panel compared the digital ad tax law to the Stamp Act, which helped usher in the Declaration of Independence nearly 250 years ago.
"As much today as 250 years ago, criticizing the government—for taxes or anything else—is important discourse in a democratic society. The First Amendment forbids Maryland to suppress it," wrote Judge Julius N. Richardson, an appointee of President Donald Trump during his first term.
Joining Richardson were fellow judges Toby J. Heytens, an appointee of former President Joe Biden, and Henry F. Floyd, who was appointed by former President Barack Obama.
In response to the ruling, the Maryland House Freedom Caucus issued a statement claiming revenues from the law have fallen well short of their intended goals to help fund the Blue Print.
“Democrats in Annapolis promised this tax would pay for their spending spree. It hasn’t,” said Freedom Caucus Vice Chair Kathy Szeliga. “Maryland families are on the hook not only for the tax dollars already spent that must be refunded, but for years of legal fees. This is fiscal malpractice.”
The law itself, minus the provision, remains intact, due to a Maryland Supreme Court ruling issued back in May of 2023.
In the meantime, Republicans sent a letter to Maryland Comptroller Brooke Lierman demanding she answer a series of questions.
