On February 12th, 2021, Maryland became the first US state to pass a broad stroke digital advertising tax aimed at attempting to balance the equation between big tech influence and school funding.
If this story sounds at all familiar then you likely have been following along with some of our news about how Google has begun to levy Digital Services Taxes and Surcharges due to legislations passed in Europe and the UK.
Just two days ago, March 2nd 2021, we also learned that a similar surcharge or DST will be incurred by advertisers in or targeting France and Spain.
Although the new Maryland digital advertising tax is the first of its kind in the states, many other states have also been considering a similar legislation. The tax will be levied, similar to those in the EU and UK, against today’s prominent advertising platforms – namely Google, Facebook, and Amazon.
Proponents for the tax believe that it could bring in as much as $250 million in its first year of enactment with the proceeds being passed down to schools – spurred on by the impact of the coronavirus pandemic and continuing threat of COVID-19.
A Page Out Of Europe & The UK
As seen in the NY Times:
“The Maryland tax, which applies to revenue from digital ads that are displayed inside the state, is based on the ad sales a company generates. A company that makes at least $100 million a year in global revenue but no more than $1 billion a year will face a 2.5 percent tax on its ads. Companies that make more than $15 billion a year will pay a 10 percent tax. Facebook’s and Google’s global revenues far exceed $15 billion.”
While the Maryland tax may still face certain legal challenges over time, the mere fact that it was passed sets a distinct precedent for other states to follow suit. New York, for example, attempted to do so and failed in 2020.
So, as we have seen in select EU countries and the UK, the impact of such taxes on tech giants like Google and Amazon have already now been “trickled” down to the advertisers:
That is where much of the opposition to Maryland’s tax lies – while beneficial from the perspective of the broader community, business owners and advertisers could eventually “share in the burden”.
How Ecommerce Merchants Can Prepare
At this time there is nothing immediate that needs to happen. However, most ecommerce merchants today are “casting a wide net” to reach as many shoppers as possible through paid advertising on search engines and social media.
It is often that little to no granular restrictions on location targeting are put into place – although it is very common to see merchants and advertisers specifically exclude targeting in Hawaii and Alaska due to fulfillment limitations.
The bottom line? Until a formal announcement is seen by Google or Facebook or any other advertising platform, ecommerce merchants and generally all advertisers need not make any adjustments to their location targeting criteria.
Should the time come, it is very easy to add location exclusions for ads served from these platforms.