ANNAPOLIS, Md. (AP) — A Maryland state tax court has struck down the state’s first-in-the-nation tax on digital advertising and ordered state officials to repay the tax money already collected from big tech firms.
The Maryland Tax Court said the tax violates the federal Internet Tax Freedom Act as well as the First Amendment and the commerce and due process clauses of the U.S. Constitution.
The legal fight has been watched by other states that are considering taxes for online ads. Maryland estimated the tax, approved in 2021, could raise about $250 million a year to help pay for a sweeping K-12 education measure.
In Friday's decision, the tax court ordered the state to repay the tax money already collected by Apple, Google and Peacock TV.
The law taxed revenue that large companies make on digital advertisements shown in Maryland. Companies making more than $100 million in global annual gross revenues were taxed at a 2.5% rate. The rate increased for companies with larger revenues, topping out at a 10% rate for companies making $15 billion or more in global gross annual revenues.
Supporters of the law contended that Maryland needed to overhaul its tax methods in response to significant changes in how businesses advertise. But attorneys representing Big Tech companies including Meta and Amazon challenged the law in multiple legal venues, arguing in part that they were unfairly targeted.
Last year, 4th U.S. Circuit Court of Appeals ruled part of the law violated the Constitution because it blocked Big Tech companies from telling customers about the tax. That, Judge Julius Richardson said, violated the right to free speech.
Maryland Senate President Bill Ferguson and House Speaker Joseline Pena-Melnyk, both Democrats, issued a statement saying they “respectfully disagree” with the tax court ruling and expect the legal process to continue.
They said the tax was enacted to keep the state's tax system in pace with a changing economy.
“We remain committed to ensuring that Maryland’s tax system is fair, sustainable, and reflects today’s economy,” they said. “We will continue working with the Attorney General and Comptroller as this matter proceeds through the courts.”
The tax court said Congress — not the state legislature — is tasked with regulating interstate commerce, and that the tax law was inappropriately based on global revenue rather than revenue from in-state advertising.
The federal Internet Tax Freedom Act bars the taxation of e-commerce if similar services are not taxed. At least for now, the tax court found, there isn't much of a difference between digital advertising and print or billboard ads, which means the bar on taxation applies.
FILE - A sign is displayed on a Google building at their campus in Mountain View, Calif., Sept. 24, 2019. (AP Photo/Jeff Chiu, File)
FILE - People talk near a Meta sign outside of the company's headquarters in Menlo Park, Calif., March 7, 2023. (AP Photo/Jeff Chiu, File)
HONOLULU (AP) — Tropical Storm Lala is expected to strengthen to a hurricane before reaching Hawaii's Big Island this weekend, forecasters said Friday, bringing heavy rains that can cause destructive flooding and strong winds that can fuel wildfires.
The National Hurricane Center said Lala should be at hurricane strength by the time it approaches the Big Island early Saturday.
If it makes landfall there, it would be the first to do so since 1871. Back then, according to a professor's research of newspaper accounts, a Category 3 hurricane hit the northeast corner of the island, said Vanessa Almanza, a meteorologist with the National Weather Service in Honolulu.
“First time since satellites,” Almanza said. “The latest forecast has it very close to the southern tip of the Big Island.”
A hurricane warning was issued for the Big Island, and a tropical storm warning was in effect for Maui County, which includes the islands of Maui, Molokai, Lanai and Kahoolawe.
Officials and residents braced for Lala regardless of whether Hawaii takes a direct hit.
“It doesn’t take landfall to create destruction,” Almanza said. “A lot of the impacts are felt outside of the hurricane.”
Some areas of the Big Island could see as much as 25 inches (63.5 centimeters) of rain, county officials said. Shelters were opened, and various events were canceled ahead of heavy rain expected later in the day.
State Rep. Jeanné Kapela, who represents communities that are in the storm's possible track, traveled to the Big Island from Honolulu on Friday morning and called for people to be on alert.
“We're encouraging residents to take this storm seriously, remain vigilant, and get somewhere safe before conditions deteriorate,” she said in a text message to The Associated Press as her flight took off. “We're hopeful the storm moves through quickly, but we're preparing for whatever comes.”
Kapela also noted that many parts of the state are still reeling from devastating flooding in March, saying, “We know how quickly heavy rain and flooding can impact our rural communities.”
Coffee farmer Bruce Corker said it was “sunny and beautiful” Friday in Holualoa, on the west side of the Big Island, and the island's only Costco seemed normal a day earlier. Still, he said, the prospect of “streams overflowing and high winds” was worrisome.
As winds ramped up across the islands, there were no red flag warnings in place but Almanza said the dry and breezy conditions would still elevate fire concerns.
In 2023 the Maui town of Lahaina burned during extreme winds amid a hurricane passing far to the south of Hawaii.
“Since the fire, everybody is way more aware of weather in general and our environment and things that are happening,” said Archie Kalepa of Lahaina, who is well known in the area for his surfing, paddling and other ocean skills and has been watching the storm closely.
As of late Friday morning, Tropical Storm Lala was located about 340 miles (545 kilometers) east-southeast of South Point, Hawaii, according to the National Hurricane Center. It had maximum sustained winds of 60 mph (95 kph) and was moving toward the west-northwest at 14 mph (22 kph).
The wind speed threshold for a Category 1 hurricane is 74 mph (46 kph).
This NOAA satellite image taken at 5:22 p.m. EST on Friday, Aug. 14, 2026, shows Tropical Storm Lala as it approaches Hawaii's Big Island. (NOAA via AP)
