The lawsuit is backed by a broad coalition of corporations across the country through a number of trade groups, including the US Chamber of Commerce and the Internet Association, a Washington-based organization that counts Silicon Valley’s best-known companies. It has great legal and political significance at a time when lawmakers, well beyond Maryland’s borders, are viewing the tech industry’s flashy pandemic gains as a potential source of much-needed new revenue.
“Given the current pandemic and economic uncertainty, increasing taxes on services used by small businesses to keep themselves going is a particularly bad and inappropriately timed policy,” said Caroline Harris, vice president of tax policy at the US Chamber made a statement.
In the complaint, filed in a Maryland federal district court, the tech giants and their political allies argue that the state’s online advertising tax suffers from “many ailments” and, as a result, “threatens to increase costs for consumers and manufacturers” for businesses it is harder to get in touch with potential customers. “
Stephen P. Kranz, a lobbyist at McDermott Will & Emery, said the lawsuit against Maryland is also a legal warning to other governments. “We hope that policy makers in these states will realize that the Maryland persecution only leads to the courthouse,” he said.
Under tight tax constraints, Maryland legislature passed its tax last week to raise approximately $ 250 million annually for local education reform initiatives. Her vote, overriding an earlier veto by Governor Larry Hogan (R), came about as a dozen or so states, including New York, Indiana, Montana, and Washington, contemplated ways tech giants were thinking about the ads they sell and who tax information collected from them or the services they offer.
Maryland law is aimed at technology companies that generate more than $ 100 million in ad sales each year. These companies, led by Amazon, Facebook and Google, were among the main adversaries, joining a variety of local and national corporate groups through a coalition called the Marylanders for Tax Fairness that has advertised and lobbied lawmakers to prevent this the new policy.
(Media such as the Washington Post had also supported the coalition’s anti-tax lobbying. Amazon CEO Jeff Bezos owns the Post.)
The tech giants and their corporate allies argue that Maryland’s new policies would hurt local businesses the most, forcing them to pay higher prices to promote their offerings when they can least afford the cost. The allegations seemed to serve as an implicit admission that Amazon, Facebook, and Google each intend to increase their ad rates to cover the cost of new taxes. However, the trio of tech giants, who collectively generated more than $ 210 billion in sales in the final quarter of 2020, have declined in recent days to say exactly how they would implement Maryland policies, despite laying the groundwork for a lawsuit had laid to pick them up.
Her formal legal volley arrived on Thursday. The U.S. Chamber, the Internet Association, and two other technology-focused trade groups, NetChoice and the Computer and Communications Industry Association, argued that Maryland’s tax was unfair because it only aimed at online advertising, not the same ads that were in print or Television appear. They pointed out a 2006 federal law designed to prohibit what the industry sees as discriminatory local taxes on online websites and services.
“It is unfortunate that the Maryland General Assembly has decided to punish a handful of nongovernmental companies with this discriminatory law,” said Jon Berroya, general counsel for the Internet Association.
The representatives of Amazon, Facebook and Google also criticized the calculation of the tax. And they questioned the “punitive” origins of the Issue Law after lawmakers in Maryland initially hoped to use it to crack down on Internet companies collecting large amounts of data to calibrate their lucrative, targeted online ads. Legislators, who last year heard statements from financiers who viewed the tax as a potential substitute for privacy protection, had essentially passed a policy “akin to a fine for perceived misconduct,” the groups claim.
Maryland tax law architects expected a lawsuit in the days before they voted for approval on Friday. Maryland Attorney General Brian. E. Frosh also warned state lawmakers last year that the tax could be abolished if approved. But his supporters, including Senator Bill Ferguson (D-Baltimore City), previously described the effort as an attempt to ensure the tech industry pays its “fair share” at a time when governments across the country are facing significant fiscal issues Constraints are faced.
“This is a conversation we need to have at the national level,” Ferguson, its main sponsor, said in an interview last week. “What is the responsibility of multinational digital platforms to contribute to society’s growth and civic infrastructure?”