Maryland's Digital Advertising Tax Was Just Struck Down. Apple, Google, and Peacock TV Are Getting Refunds.

Maryland's five-year experiment with taxing digital advertising just ended in court.

On August 14, 2026, the Maryland Tax Court struck down the state's controversial Digital Advertising Gross Revenues Tax in three separate rulings — and ordered the Maryland Comptroller to refund all digital ad taxes paid by Apple, Google, and Peacock TV since 2022, plus interest. As the Associated Press reported, the Maryland Tax Court said the tax violates the federal Internet Tax Freedom Act as well as the First Amendment and the commerce and due process clauses of the U.S. Constitution.

Maryland was the first state in the country to pass a digital advertising tax, back in 2021. It applied rates ranging from 2.5% to 10% on gross revenue from digital advertising services earned by companies with annual global revenue exceeding $100 million. The Maryland Comptroller reportedly collected about $535.5 million in digital advertising tax revenue through July 2026 — money the state had been holding rather than spending, anticipating exactly this kind of legal outcome.

That decision to hold the money rather than spend it may now prove prescient. The refund order — with interest — covers five and a half years of collections.

Why the Court Struck It Down

The core legal issue was straightforward, even if the path to this ruling took five years.

As the Maryland Tax Court wrote in its decision, Congress could not have been any clearer that it did not want internet services of any kind taxed unless other similar services in the broader sense were taxed. Maryland taxes digital advertising — but not nondigital advertising. There is no statewide Maryland tax on advertising services that are not digital. That asymmetry is exactly what the Internet Tax Freedom Act prohibits.

The court found three separate constitutional violations. The tax discriminated against electronic commerce in violation of ITFA. It violated the Dormant Commerce Clause because its graduated rates and $100 million threshold depend on global revenues rather than Maryland activity — meaning companies with substantial out-of-state business were effectively penalized for operating nationally. And it violated due process for similar reasons.

As Forvis Mazars' analysis of the ruling explained, the court found that the tax was not fairly apportioned and, in practical effect, discriminated against businesses with substantial out-of-state activity.

What Happens Next — The Appeal

This isn't necessarily the end of the story.

Maryland Comptroller Brooke Lierman said she respected but strongly disagreed with the decision and will continue to work with the Attorney General of Maryland in defending this important law. Maryland Senate President Bill Ferguson and House Speaker Joseline Pena-Melnyk issued a joint statement expressing their disappointment and support for an appeal.

The Comptroller has 30 days to appeal to a Maryland circuit court. If an appeal is filed — which all indications suggest it will be — the refund order will likely be stayed pending the outcome. That means Apple, Google, and Peacock TV won't see their money for months or possibly years while the appeal works through the courts.

But the Tax Foundation's analysis of the ruling was direct: after long years, it is the beginning of the end, and the Tax Court's ruling, which represents a robust and comprehensive victory for the petitioners, should be regarded as a harbinger as lawmakers consider digital advertising taxes in other states.

What It Means for Illinois, Utah, Minnesota, and Pennsylvania

This ruling lands at a particularly consequential moment — because several states are actively pursuing digital advertising taxes right now.

Illinois passed sweeping new digital taxes in its June 1 budget — including a new tax on social media companies. Utah's targeted advertising tax, which we covered in depth, takes effect January 2027 and faces the same ITFA vulnerability that just sank Maryland's law. Minnesota's digital advertising tax proposal passed the House this year and is in the Senate. Pennsylvania's digital ad tax passed its House 139-63.

As Avalara's analysis of the ruling's impact noted, the decisions could undermine recently enacted digital ad taxes in Illinois, Utah, and Washington. The legal framework that killed Maryland's tax — ITFA's prohibition on discriminatory taxes on electronic commerce — applies equally to every other state's digital advertising tax that taxes online ads without taxing equivalent offline ones.

Utah's law, which we wrote about in July, explicitly tried to avoid Maryland's fate by calling the tax a "targeted advertising" tax rather than a "digital advertising" tax — hoping the different terminology would sidestep ITFA. The Maryland Tax Court's ruling suggests that terminology alone won't be enough if the practical effect is the same: taxing online advertising that has no offline equivalent.

Every state that has passed or is considering a digital advertising tax now has to answer the same question Maryland couldn't: how do you tax digital advertising without discriminating against electronic commerce under ITFA?

The $535 Million Question

One more thing worth noting for any business that paid Maryland's digital advertising tax since 2022.

If the ruling survives appeal, the refund order covers all taxes paid since the first collection year in 2022. For the three named plaintiffs — Apple, Google, and Peacock TV — the refunds will be substantial. For other companies that paid the tax and didn't file their own legal challenges, the path to a refund is less clear and may require separate action.

If your business paid Maryland's digital advertising tax and you haven't already filed a protective refund claim, consult a tax professional about your options before the appeal process concludes. The window for action may be time-sensitive depending on how the appeal proceeds.

Not sure how Maryland's ruling affects your digital advertising tax obligations in Maryland, Illinois, Utah, or other states considering similar taxes? Book a free consultation with our team at sales.tax. We'll walk through your specific situation and what the ruling means for your compliance going forward.