Panel of judges says a First Amendment challenge to Maryland's digital ad tax should be considered

A federal appeals court has directed a lower federal court to consider the merits of a challenge to Maryland’s first-in-the-nation digital advertising tax on First Amendment grounds

ANNAPOLIS, Md. -- A federal appeals court directed a lower federal court on Wednesday to consider the merits of a challenge to Maryland’s first-in-the-nation digital advertising tax on First Amendment grounds, while agreeing that three other challenges should be dismissed.

It’s a law that attorneys for Big Tech have contended unfairly targets companies like Facebook, Google and Amazon. The legal case is being closely watched by other states that have also weighed a similar tax for online ads.

The three-judge panel of the 4th U.S. Circuit Court of Appeals disagreed with a lower federal court's decision to dismiss the challenge on First Amendment grounds argued by the U.S. Chamber of Commerce, as well as three other trade associations.

The Maryland law, which taxes companies like Facebook and Google for money they make from digital ads on the internet, prohibits the companies from passing along costs to customers who buy ads. But plaintiffs contended that passing along the costs violated the First Amendment.

“The district court in the first instance should decide whether the pass-through provision restrains speech and, if so, whether it passes constitutional muster,” the appeals court said in its decision.