A federal appeals court ruled that Maryland's tax on digital advertising is unconstitutional, as it restricts companies from informing customers about the tax, infringing on their free speech rights. The law targeted major tech firms, claiming the tax would generate $250 million annually for education. The court underscored the importance of public discourse regarding taxation, stating that silencing criticism compromises democratic values. The ruling, which reversed a previous decision, directs the lower court to determine an appropriate remedy while signaling potential implications for similar state tax initiatives.
Maryland's first-in-the-nation tax on digital advertising violated the Constitution as it prevents companies from informing customers about the tax, infringing on their free speech rights.
The plaintiffs argued that the tax law was designed to shield lawmakers from criticism and political accountability by preventing companies from explaining how the tax affects pricing.
Judge Julius Richardson noted that "criticizing the government - for taxes or anything else - is important discourse in a democratic society".
The unanimous ruling reverses a prior decision and instructs a lower court to find an appropriate remedy regarding the unconstitutional aspects of the tax.
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