Tax regulations

Maryland Comptroller Passes Digital Ad Gross Revenue Tax Rules

On December 3, 2021, the Comptroller of Maryland issued a notice of adoption of the Digital Advertising Gross Revenue Tax Rule (which was originally proposed on October 8, 2021). In accordance with Maryland’s administrative procedure law, the final adopted settlement will become effective in 10 calendar days, or December 13, 2021. (See Md. Code Ann., State Government § 10-117(a)(1).)

The final settlement passed almost entirely as proposed, with only two minor changes that the Attorney General (AG) of Maryland certified as insubstantial. Specifically, the changes to the October 8 draft rulemaking relate to the information that can be used to determine the location of a device and are described by the GA as follows:

  • Regulation .02(C): The Controller clarifies language regarding authorized sources of information a taxpayer can use to determine the location of a device. Specifically, this Final Action Amendment replaces “both technical information and the terms of the underlying contract” with “both technical information and non-technical information included in the contract”.
  • Regulation .02(C)(2): The controller modifies the non-exhaustive list of technical information to include “industry standard measurements”.

Practical note: While “industry standard parameters” are a nice addition to the list of sources that can be used to determine the location of devices for procurement purposes, the important and fundamental questions and concerns submitted as part of the comments were not addressed by the comptroller when adopting the final digital advertising tax regulations. The tax is the subject of multiple lawsuits (both in state and federal courts) and pending a court order to the contrary is expected to take effect as of January 1, 2022, with the first obligation to declaration for large taxpayers in April 2022. Taxpayers wondering how to comply with this new tax are invited to contact the authors.