Law360 quoted David Fruchtman in an April 6 article titled "Three Top Tax Issues From 2021 State Legislative Sessions." According to the article, Maryland began attracting attention in 2020 with H.B. 732, a bill to establish a special tax imposed on big online companies that sell advertising on their platforms. In 2021, H.B. 732 was challenged as a violation of the Internet Tax Freedom Act, which forbids discrimination against electronic commerce, and of the due process and commerce clauses of the US Constitution.
The lawsuit has, at least temporarily, halted H.B. 732. But it hasn't halted the aspirations of other states. In addition to Maryland, other states have proposals to tax digital advertising or other collection of digital data. Some are similar to the Maryland law, which establishes a dedicated tax. Others extend the existing sales tax to digital services.
Fruchtman, chair of Steptoe's national state and local tax practice, says: "The states do tend to mimic each other. So if this lawsuit is not successful in defeating [the Maryland tax], I think we're going to see it in many other jurisdictions."
The full article can be read at Law360 (subscription required).