For Maryland businesses that have paid the state’s digital advertising tax, a new court case striking down the law raises the potential for seeking significant refunds.
Maryland’s Digital Advertising Gross Revenues Tax (DAGRT) has faced significant legal challenges since its enactment in 2021. On August 14, 2026, the Maryland Tax Court issued three landmark decisions finding the tax unlawful under the federal Internet Tax Freedom Act (ITFA), the dormant Commerce Clause, and the Due Process Clause of the U.S. Constitution.
The decisions, issued in separate cases brought by Apple, Google, and Peacock TV, represent a significant victory for taxpayers and raise important questions about the ability of states to impose taxes specifically targeting digital commerce.
However, for businesses that have paid Maryland's digital advertising tax, the most immediate consideration may be whether they can recover those payments. Although the Tax Court ordered refunds to the prevailing taxpayers, those decisions apply only to the parties before the court and do not automatically entitle other businesses to refunds. Applicable statutes of limitation continue to govern refund claims, making timely evaluation essential for businesses that paid tax and want to pursue a refund.
For businesses in this situation, Frost Law can help. Contact Frost Law at (410) 497-5947 or schedule a confidential consultation.
Enacted in 2021 and effective January 1, 2022, Maryland's Digital Advertising Gross Revenues Tax was the first state tax in the United States specifically imposed on revenues generated from digital advertising services.
The tax generally applies to businesses with at least $100 million in annual global gross revenues and at least $1 million in annual gross revenues attributable to digital advertising services in Maryland. The applicable rate, which ranges from 2.5% to 10%, is determined by the business’ worldwide annual gross revenues.
Following enactment, the tax structure immediately raised concerns about whether Maryland could impose different tax burdens on businesses based on their worldwide operations while targeting digital advertising services that critics argued were comparable to traditional, untaxed advertising.
On August 14, 2026, the Maryland Tax Court granted summary judgment in favor of Apple, Google, and Peacock TV in three separate proceedings challenging the legality of the DAGRT.
The decisions followed several years of litigation, including an earlier challenge in Comptroller of Maryland v. Comcast of California. In that case, the Supreme Court of Maryland required taxpayers to exhaust available administrative remedies before pursuing judicial review, without deciding the underlying constitutional questions.
After proceeding through the required administrative process, the three taxpayers obtained rulings on the merits, and the Tax Court identified three principal legal deficiencies.
The court concluded that Maryland's tax violated the federal Internet Tax Freedom Act, which prohibits discriminatory taxation of electronic commerce.
The court emphasized that digital and traditional advertising serve substantially similar commercial purposes — communicating promotional messages intended to influence consumer behavior.
Because Maryland imposed its tax on digital advertising while generally leaving comparable nondigital advertising untaxed, the court determined that the tax unlawfully discriminated against electronic commerce.
The court also found that the DAGRT violated the dormant Commerce Clause, which limits a state’s ability to impose taxes that improperly burden or discriminate against interstate commerce.
Because the tax relied on worldwide revenues to establish the applicable tax rate, two businesses generating the same digital advertising revenues in Maryland could face different tax rates solely because one earned more revenue outside the state.
The court concluded that this arrangement failed constitutional requirements concerning fair apportionment and nondiscrimination and lacked a sufficient relationship between the additional tax burden and services provided by Maryland.
The court separately determined that the tax violated the Due Process Clause because it increased Maryland taxes based on a company’s worldwide revenues rather than its business activities within the state.
Together, these findings led the Tax Court to reverse the Comptroller's refund denials and order refunds, with applicable interest, to the three prevailing taxpayers.
The Maryland Tax Court's rulings may create significant refund opportunities for businesses that previously paid the DAGRT. However, taxpayers should not assume that a ruling invalidating a tax automatically results in reimbursement.
Maryland's refund framework generally requires taxpayers to pursue the applicable administrative remedies, and refund claims remain subject to statutory deadlines.
Under the Maryland Tax General Article, a claim for refund generally must be filed within three years from the date the tax, interest, or penalty is paid, unless a specific statutory exception applies.
This rule is particularly important for businesses that began making payments when the tax first became effective in 2022. Depending on the timing of their payments, certain refund periods may already have expired, while others may remain available. If the three years runs from each payment date, that means 2022 payments and many 2023 payments are likely already time-barred.
Not necessarily.
In Maizel v. Comptroller of the Treasury, Maryland’s intermediate appellate court addressed refund claims arising from the state’s income tax structure, which the U.S. Supreme Court held unconstitutional under the dormant Commerce Clause in Comptroller of the Treasury of Maryland v. Wynne. The court determined that a subsequent judicial decision recognizing a constitutional defect did not independently restart the applicable refund limitations period.
Although Maizel concerned Maryland income taxes rather than the DAGRT, it illustrates an important principle: A favorable constitutional ruling does not necessarily revive a refund claim that is otherwise time-barred.
Consequently, businesses should not assume that waiting until the Maryland litigation reaches a final appellate resolution will preserve their ability to seek refunds.
Although Maryland has filed an appeal and sought judicial review of the Tax Court’s decision, businesses that paid the Digital Advertising Gross Revenues Tax should not wait for the litigation to be resolved before evaluating potential refund opportunities.
Given the applicable statutes of limitations, timely action is essential to preserving potential refund rights. Businesses should review their historical tax payments, assess their eligibility for refunds, and determine whether any filing deadlines are approaching or have passed, and whether any refund claims are warranted.
Waiting for a final judicial resolution could result in the loss of otherwise available refund opportunities. Businesses should also evaluate carefully before changing their filing or payment practices, because the decisions bind only the three petitioners and remain subject to judicial review.
Frost Law can assist businesses in navigating these developments, including evaluating their exposure to Maryland’s digital advertising tax, identifying potential refund claims, assessing applicable deadlines, and developing strategies to protect their rights while the litigation continues. Businesses can contact Frost Law at (410) 497-5947 or schedule a confidential consultation.
For Maryland businesses that have paid the state’s digital advertising tax, a new court case striking down the law raises the potential for seeking significant refunds.
Maryland’s Digital Advertising Gross Revenues Tax (DAGRT) has faced significant legal challenges since its enactment in 2021. On August 14, 2026, the Maryland Tax Court issued three landmark decisions finding the tax unlawful under the federal Internet Tax Freedom Act (ITFA), the dormant Commerce Clause, and the Due Process Clause of the U.S. Constitution.
The decisions, issued in separate cases brought by Apple, Google, and Peacock TV, represent a significant victory for taxpayers and raise important questions about the ability of states to impose taxes specifically targeting digital commerce.
However, for businesses that have paid Maryland's digital advertising tax, the most immediate consideration may be whether they can recover those payments. Although the Tax Court ordered refunds to the prevailing taxpayers, those decisions apply only to the parties before the court and do not automatically entitle other businesses to refunds. Applicable statutes of limitation continue to govern refund claims, making timely evaluation essential for businesses that paid tax and want to pursue a refund.
For businesses in this situation, Frost Law can help. Contact Frost Law at (410) 497-5947 or schedule a confidential consultation.
Enacted in 2021 and effective January 1, 2022, Maryland's Digital Advertising Gross Revenues Tax was the first state tax in the United States specifically imposed on revenues generated from digital advertising services.
The tax generally applies to businesses with at least $100 million in annual global gross revenues and at least $1 million in annual gross revenues attributable to digital advertising services in Maryland. The applicable rate, which ranges from 2.5% to 10%, is determined by the business’ worldwide annual gross revenues.
Following enactment, the tax structure immediately raised concerns about whether Maryland could impose different tax burdens on businesses based on their worldwide operations while targeting digital advertising services that critics argued were comparable to traditional, untaxed advertising.
On August 14, 2026, the Maryland Tax Court granted summary judgment in favor of Apple, Google, and Peacock TV in three separate proceedings challenging the legality of the DAGRT.
The decisions followed several years of litigation, including an earlier challenge in Comptroller of Maryland v. Comcast of California. In that case, the Supreme Court of Maryland required taxpayers to exhaust available administrative remedies before pursuing judicial review, without deciding the underlying constitutional questions.
After proceeding through the required administrative process, the three taxpayers obtained rulings on the merits, and the Tax Court identified three principal legal deficiencies.
The court concluded that Maryland's tax violated the federal Internet Tax Freedom Act, which prohibits discriminatory taxation of electronic commerce.
The court emphasized that digital and traditional advertising serve substantially similar commercial purposes — communicating promotional messages intended to influence consumer behavior.
Because Maryland imposed its tax on digital advertising while generally leaving comparable nondigital advertising untaxed, the court determined that the tax unlawfully discriminated against electronic commerce.
The court also found that the DAGRT violated the dormant Commerce Clause, which limits a state’s ability to impose taxes that improperly burden or discriminate against interstate commerce.
Because the tax relied on worldwide revenues to establish the applicable tax rate, two businesses generating the same digital advertising revenues in Maryland could face different tax rates solely because one earned more revenue outside the state.
The court concluded that this arrangement failed constitutional requirements concerning fair apportionment and nondiscrimination and lacked a sufficient relationship between the additional tax burden and services provided by Maryland.
The court separately determined that the tax violated the Due Process Clause because it increased Maryland taxes based on a company’s worldwide revenues rather than its business activities within the state.
Together, these findings led the Tax Court to reverse the Comptroller's refund denials and order refunds, with applicable interest, to the three prevailing taxpayers.
The Maryland Tax Court's rulings may create significant refund opportunities for businesses that previously paid the DAGRT. However, taxpayers should not assume that a ruling invalidating a tax automatically results in reimbursement.
Maryland's refund framework generally requires taxpayers to pursue the applicable administrative remedies, and refund claims remain subject to statutory deadlines.
Under the Maryland Tax General Article, a claim for refund generally must be filed within three years from the date the tax, interest, or penalty is paid, unless a specific statutory exception applies.
This rule is particularly important for businesses that began making payments when the tax first became effective in 2022. Depending on the timing of their payments, certain refund periods may already have expired, while others may remain available. If the three years runs from each payment date, that means 2022 payments and many 2023 payments are likely already time-barred.
Not necessarily.
In Maizel v. Comptroller of the Treasury, Maryland’s intermediate appellate court addressed refund claims arising from the state’s income tax structure, which the U.S. Supreme Court held unconstitutional under the dormant Commerce Clause in Comptroller of the Treasury of Maryland v. Wynne. The court determined that a subsequent judicial decision recognizing a constitutional defect did not independently restart the applicable refund limitations period.
Although Maizel concerned Maryland income taxes rather than the DAGRT, it illustrates an important principle: A favorable constitutional ruling does not necessarily revive a refund claim that is otherwise time-barred.
Consequently, businesses should not assume that waiting until the Maryland litigation reaches a final appellate resolution will preserve their ability to seek refunds.
Although Maryland has filed an appeal and sought judicial review of the Tax Court’s decision, businesses that paid the Digital Advertising Gross Revenues Tax should not wait for the litigation to be resolved before evaluating potential refund opportunities.
Given the applicable statutes of limitations, timely action is essential to preserving potential refund rights. Businesses should review their historical tax payments, assess their eligibility for refunds, and determine whether any filing deadlines are approaching or have passed, and whether any refund claims are warranted.
Waiting for a final judicial resolution could result in the loss of otherwise available refund opportunities. Businesses should also evaluate carefully before changing their filing or payment practices, because the decisions bind only the three petitioners and remain subject to judicial review.
Frost Law can assist businesses in navigating these developments, including evaluating their exposure to Maryland’s digital advertising tax, identifying potential refund claims, assessing applicable deadlines, and developing strategies to protect their rights while the litigation continues. Businesses can contact Frost Law at (410) 497-5947 or schedule a confidential consultation.
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