Maryland approves the first state tax on digital ads from Facebook, Google

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Maryland has approved the country's first tax on the revenue brought in from digital advertisements placed by companies like Facebook, Google, and Amazon.

Credit: Maryland State House
Credit: Maryland State House


On Friday, the State Senate voted to override the governor's veto of the measure following a similar vote from the House of Delegates, The New York Times reports. The measure is expected to generate as much as $250 million in its first year.

There do appear to be legal risks to the measure, which will likely face stiff challenges in court over how much governments can tax social media and technology giants. Both opponents and analysts cautioned that the bill could run afoul of both the First Amendment and federal regulations preventing discriminatory taxes on internet companies, The Washington Post reported in January.

The Maryland tax specifically applies to digital ads that are displayed within the state. It's also levied based on the ad sales that a company generates. Companies that make at least $100 million to $1 billion a year will be taxed at a 2.5% rate. Companies that make more than $15 billion -- which includes Facebook and google -- will face a 10% tax on digital ad revenue.

In addition to Silicon Valley lobbyists, other opponents of the bill include Maryland Republicans, local media outlets, and telecom companies. Those opponents say that the cost of the bill could be passed along to small businesses that buy advertising.

But state governments, which have been hurting during the pandemic, see similar bills as a way to refill the coffers. Legislators in Connecticut and Indiana have already introduced similar measures to tax social media giants.

The tax legislation is just part of a growing debate about the dominance and power of technology giants. In the U.S., companies like Facebook and Google are facing multiple antitrust lawsuits. Antitrust legislation introduced at the federal level could target those companies, as well as Apple.

The measures in the U.S. also follow in the footsteps of governments in Europe, which have introduced both new restrictions and new taxes on American and other technology giants.

Although antitrust laws and regulations could spillover and affect Apple, the Cupertino tech giant doesn't rely on advertising revenue. Instead, the bulk of the money it makes comes from sales of hardware and services.

Comments

  • Reply 1 of 10
    sdw2001sdw2001 Posts: 17,671member
    A pointless bill that accomplishes little and may be harmful.  First, it’s discriminator— based on company size and even what the particular service is.  They still pay tax on profits....now they have to pay an additional 2.5 to 10%? And only on ads that appear “in the state.”   Good lord...have fun keeping track of that.  And they are just going to do what all businesses do....pass on the cost in some way.   I’m all for going after Big Tech on anti trust, fraud, breach of contract and section 230 reform. But this tax is absurdly dumb.  
    jdwwilliamlondonlongpathwatto_cobra
  • Reply 2 of 10
    This is in the news as a sales tax on any digital download including ebooks and Netflix.  
    HOPE IT GOES DOWN IN FLAMES  
    Stooopid  Greedy legislators. 
    I expect them to start having lung capacity machines at the DMV so when you renew your license they can tax you on the air you breathe.
    If the state budget is so poor the legislators can forgo their healthcare and their pay for the three months out of the year that they work.
    williamlondonwatto_cobra
  • Reply 3 of 10
    sdw2001 said:
    A pointless bill that accomplishes little and may be harmful.  First, it’s discriminator— based on company size and even what the particular service is.  They still pay tax on profits....now they have to pay an additional 2.5 to 10%? And only on ads that appear “in the state.”   Good lord...have fun keeping track of that.  And they are just going to do what all businesses do....pass on the cost in some way.   I’m all for going after Big Tech on anti trust, fraud, breach of contract and section 230 reform. But this tax is absurdly dumb.  
    How is Facebook taxed at the state level? Sure, they pay federal tax for their entire operation but at the state level it's pretty limited unless they are based in that state, which I'm guessing they're not overall.

    A few years back in most states you could purchase a product over state lines on the internet and no one paid state sales tax, unless the company was incorporated. Now in most states that's no longer true. Why should ads be any different? If I buy an ad in a newspaper I pay tax and the company pays tax on those profits. why should the internet be the exception?

    Sales Tax

    https://www.facebook.com/business/help/225860631518504?id=540542143143969

    williamlondondysamoria
  • Reply 4 of 10

    Dogperson said:
    This is in the news as a sales tax on any digital download including ebooks and Netflix.  
    HOPE IT GOES DOWN IN FLAMES  
    Stooopid  Greedy legislators. 
    I expect them to start having lung capacity machines at the DMV so when you renew your license they can tax you on the air you breathe.
    If the state budget is so poor the legislators can forgo their healthcare and their pay for the three months out of the year that they work.
    Why shouldn't the buyer and seller pay sales tax, when brick-in-mortar small business have to when they sell a real book or visit a movie theater?
    williamlondondysamoriaHank2.0
  • Reply 5 of 10
    sdw2001sdw2001 Posts: 17,671member
    sdw2001 said:
    A pointless bill that accomplishes little and may be harmful.  First, it’s discriminator— based on company size and even what the particular service is.  They still pay tax on profits....now they have to pay an additional 2.5 to 10%? And only on ads that appear “in the state.”   Good lord...have fun keeping track of that.  And they are just going to do what all businesses do....pass on the cost in some way.   I’m all for going after Big Tech on anti trust, fraud, breach of contract and section 230 reform. But this tax is absurdly dumb.  
    How is Facebook taxed at the state level? Sure, they pay federal tax for their entire operation but at the state level it's pretty limited unless they are based in that state, which I'm guessing they're not overall.

    A few years back in most states you could purchase a product over state lines on the internet and no one paid state sales tax, unless the company was incorporated. Now in most states that's no longer true. Why should ads be any different? If I buy an ad in a newspaper I pay tax and the company pays tax on those profits. why should the internet be the exception?

    Sales Tax

    https://www.facebook.com/business/help/225860631518504?id=540542143143969

    That’s a reasonable point, though keeping track of ads run in the state is going to be extremely difficult. The Internet doesn’t much care about state lines.  And why is based on company revenue?  Leave it to blue states.  
  • Reply 6 of 10
    dysamoriadysamoria Posts: 3,429member
    Entirely predictable responses here... 🙄 Including the attack on “blue states”. Maryland has a mixed history. You should actually go learn about it.

    Also, when a system of abuse goes on long enough, opposition to it becomes increasingly popular.

    The people will either *eventually* have their say via elections, or be oppressed by the profiting minority that are holding on to power (which isn’t limited to one party; the Democratic Party is just as corporatist as the Republican Party).

    Do you believe in democracy or plutocratic oligarchy?

    If you think laissez-faire capitalism is great, you’re either personally benefitting from the abuses and are blinded by various biases (especially survivorship bias, which is popular with “American Dream” capitalists)...

    ... Or you’re just not paying attention to the very real, documented, and deep-term consequences (such as sociopaths ruling us via the revolving door between corporations and government, legal and financial systems that benefit only the wealthy, ecological disaster, abuses of humans & animals in industry, various societal harms, etc).

    Well, there’s also one more option: maybe you just don’t give a damn.
    kingofsomewherehot
  • Reply 7 of 10
    There is no such thing as a free lunch.

    Google, FaceBook, et al, gather all sorts of news and interesting information at no cost at all. They repackage it and republish it on their various attractive web sites at no cost at all to a large number of readers. Interspersed in all this news and other interesting information are ads for various goods and services who, in turn, pay Google, FaceBook, et al. From the visitors to these sites, Google, FaceBook, et al, gather information about the readers at no cost at all. Google, FaceBook, et al, then use that information to help the ad providers make more targeted ads, thus encouraging even more ads, and making more income for Google, FaceBook, et al.

    This is all legal...and so is taxing Google, FaceBook, et al.
    watto_cobra
  • Reply 8 of 10
    chasmchasm Posts: 2,391member
    In addition to the legal problems this law has that will almost certainly get it nullified in court, ask yourself this:

    (ignoring the biggest issue which is that it is discriminatory for a moment)

    If Maryland gets to take between 2.5 percent and 10 percent of the cost of a digital ad shown in Maryland ... what happens when the other 49 states pass similar laws with similar percentages?

    Go on, do the math ... I'll wait ...
    watto_cobra
  • Reply 9 of 10
    reebarreebar Posts: 1member
    Made an in-game purchase via Apple and it was taxed by Maryland!  You greedy people!  
  • Reply 10 of 10
    crowleycrowley Posts: 8,728member
    chasm said:
    In addition to the legal problems this law has that will almost certainly get it nullified in court, ask yourself this:

    (ignoring the biggest issue which is that it is discriminatory for a moment)

    If Maryland gets to take between 2.5 percent and 10 percent of the cost of a digital ad shown in Maryland ... what happens when the other 49 states pass similar laws with similar percentages?

    Go on, do the math ... I'll wait ...
    The price of advertising goes up, or the profit margin goes down 2.5 to 10 percent nationwide?  

    So what?  What math?
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