Maryland's digital advertisement tax component deemed unconstitutional
In a significant decision on August 15, 2025, the U.S. Court of Appeals for the Fourth Circuit ruled that Maryland's "pass-through" provision in its digital advertising tax is facially unconstitutional, violating the First Amendment’s free speech protections.
The contested provision prohibited companies subject to the tax from itemizing or separately stating the tax’s cost to their customers on invoices or bills, and from explaining that price increases were due to the tax. The court found this amounted to an impermissible content-based restriction on speech because it directly regulated how businesses could communicate with their customers about the tax.
The ruling was in favour of the Chamber of Commerce and two other trade groups, who argued that the provision violated their First Amendment free speech rights. Paul Taske of NetChoice stated that Maryland tried to prevent criticism of its tax scheme and the court recognized this as censorship.
The Maryland law, enacted in 2021, targeted larger businesses such as Amazon.com, Meta Platforms' Facebook, and Alphabet's Google. The digital advertising tax was the first of its kind in the state of Maryland.
The case, Chamber of Commerce et al v. Lierman (4th Cir., No. 24-1727), was filed by the Chamber of Commerce, NetChoice, and the Computer & Communications Industry Association, who referred to the law as a punitive assault on digital rather than print advertising.
Circuit Judge Julius Richardson wrote for a three-judge panel, stating that suppressing companies’ speech about the tax is unconstitutional in all its applications. The court compared the Maryland tax and its speech restrictions to the historical Stamp Act of 1765, emphasizing that just as colonists objected to government attempts to silence criticism of taxes, modern companies have the right to disclose such tax information under the First Amendment.
The court's decision reverses a lower court ruling and returns the case to U.S. District Judge Lydia Kay Griggsby in Greenbelt, Maryland, to determine appropriate remedies. Meanwhile, other litigation challenging the full constitutionality of the digital ad tax continues in Maryland Tax Court.
The offices of Maryland's Attorney General Anthony Brown and state Comptroller Brooke Lierman did not immediately respond to requests for comment regarding the court's decision.
The ruling reinforces that government policies imposing taxes cannot silence or restrict truthful speech about those taxes. Content-based restrictions on commercial speech—such as forbidding companies from explaining tax-related price changes—are subject to heightened judicial scrutiny and often found unconstitutional. This case sets a precedent limiting the power of states to regulate speech related to taxation, underscoring that free speech protections extend to transparent communication about government-imposed fees or taxes.
Businesses have the right to disclose tax-related information, as the Court of Appeals for the Fourth Circuit ruled that Maryland's digital advertising tax provision is facially unconstitutional and amounts to an impermissible content-based restriction on speech. The court's decision reinforces that government policies cannot silence or restrict truthful speech about taxes, setting a precedent limiting the power of states to regulate speech related to taxation.
