In the Senate of Maryland, a bill has been introduced that proposes the taxation of digital advertising. If the bill passes, it would be the first digital services tax on gross revenue introduced by any State in the US.
According to the bill, “Digital advertising services includes advertising services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services.” The new tax will be imposed on annual gross revenues derived from digital advertising services including advertising services on a digital interface in Maryland. Digital advertising services will be considered provided in the State if the user’s IP address is located in Maryland or when it is known or reasonable to suspect that the device was used in the State.
Tax rate
The digital advertising gross revenue tax rate is:
- 2.5 percent for global annual gross revenues or USD 100 million to 1 billion;
- 5 percent for global annual gross revenues or USD 1 billion to 5 billion;
- 7.5 percent for global annual gross revenues or USD 5 billion to 15 billion;
- 10 percent for global annual gross revenues exceeding USD 15 billion.
Returns
Persons with annual gross revenue derived from digital advertising services in Maryland or at least USD 1 million in a calendar year will be required to file a return on or before April 15 the next year. In addition, they will be required to file a quarterly estimated tax return on or before June 15, September 15 and December 15 or that year.
Penalties
A person who is required to file a digital advertising gross revenue tax return and who willfully fails to file the return is subject to a fine or maximum USD 5,000 and / or imprisonment or maximum 5 years. In addition, a person, including an officer or a corporation, who wants to file a false digital advertising gross revenue tax return with the intent to evade the payment of tax is guilty or perjury and is subject to the penalty for perjury.
The Act is intended to take effect on July 1, 2020, and to be applicable to all taxable years beginning after December 31, 2020.
