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Tax Law

A Night to Forget: Maryland’s Digital Advertising Services and Digital Products Tax Proposals Move Closer to Passage

During the evening of St. Patrick’s Day, the Maryland State Senate passed on third reading (i.e., a floor vote) H.B. 732, which would impose a new Digital Advertising Gross Revenues Tax and H.B. 932, which would expand Maryland’s sales tax to digital products, including streaming. H.B. 732 passed by a vote of 29-16, and H.B. 932 passed by the slightly tighter margin of 30-15. Two senators were absent from the vote.

Multiple senators argued against the passage of H.B. 732. One senator contended that, because of COVID-19 concerns, the state should not enact these new or expanded taxes at this time. The senator also took umbrage that the Senate was passing a large tax increase when they should be in session only to consider budget legislation. Another senator commented that she had received numerous messages from small businesses opposing these tax increases during a challenging economic environment.

What’s Next:

There is a tight time line to deal with these bills given that legislative session is expected to end tomorrow (March 18). Both H.B. 732 and H.B. 932 will now return to the Maryland House of Delegates for consideration of the Senate’s respective amendments. If the House of Delegates agrees with the Senate’s amendments, the bills will be voted on and passed. If the House of Delegates rejects the Senate’s amendments, the Senate may be asked to withdraw its amendments. If the Senate refuses, a conference committee may be appointed to resolve the differences between the two chambers tomorrow.

Governor Hogan is expected to veto both bills if passed. The General Assembly could override the vetoes by a three-fifths vote of both chambers’ members.

Otherwise, the legislature would need to return to Annapolis for a special session (which is currently planned for the end of May) to continue discussion and pass the legislation.