Maryland has become the first state in the United States to implement a tax on digital advertising. As with everything, this may open the flood gates for other states to begin taxing in a similar manner. If the government can justify taxing something, they will. Though Maryland is the first state to implement this tax in the United States, they’re not the first governing body to attempt to tax advertising platforms like Google, Amazon, Facebook and Microsoft globally. Advertising taxes have been passed in the UK, Austria, France and Turkey.
The Ins and the Outs
Maryland’s tax applies to revenue from digital ads that are shown inside the state and is only applicable to companies that generate over $100 million from digital advertising. For all of our SMB owning readers, we should have probably led with this.
According to Search Engine Land, “ads from companies (in this case, platforms like Google, Microsoft, Amazon and Facebook) will be taxed at a rate of 2.5% to 10%, depending on their annual global revenue. Ads from Google, which brings in far more than $15 billion a year in revenue, would be taxed at 10%. The tax will come into effect beginning this tax year, and it is expected to generate approximately $250 million in its first year, with the funds from it going towards Maryland’s schools.”
Why Should You Care?
For starters, if you work at a global or enterprise level company, you will certainly feel the sting. This could lead to big business (looking at you Under Armour) relocating out of their Baltimore, Maryland HQ. For SMB owners, this tax could very well lead to taxing businesses of all sizes in future legislation. Digital advertising plays a major role in every industry. Coupling a digital advertising tax along with the changes of iOS 14, digital advertising is becoming a little more tricky.