Maryland Adopts a Digital Advertising Gross Revenue Tax
The Maryland Comptroller of the Treasury has adopted new regulations providing guidance on the revenues derived from digital advertising services, computation of the tax, and the filing of the returns and declarations (Maryland Code Ann. Tax-General Section 11-101).
Maryland will now source digital advertising revenues based on the portion of those devices located in Maryland. “Digital advertising services” include advertisement of services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable types of digital advertising. The term does not include any advertisements on an interface that is owned or operated on by a broadcast entity or news media entity. “Device” is broadly defined as any medium through which customers may access such digital advertising services. “Digital interface” is defined as any type of software that a user is able to access. “Location” is narrowly defined as the actual, physical location of a digital interface when a user accesses a digital advertising service. “Access” means the transmittal, display, embedding, or other availability to a user for viewing or interaction.
Maryland will apportion the digital advertising revenue by an apportionment factor where the numerator is the number of devices that have accessed the digital advertising services from a location in Maryland, and the denominator is the number of devices that have accessed the digital advertising services from any location. The taxpayer will determine the device’s location using the totality of the data they have access to, including both technical and nontechnical information found in the contract for digital advertising services. The technical information used can include internet protocol, geolocation data, device registration, cookies, industry standard metrics, or any other comparable information. The location will either be within Maryland, not within Maryland but within the U.S., not within the U.S., or indeterminate. Devices whose location is indeterminate are excluded from both the numerator and the denominator of the apportionment factor; however, the amount of revenue to be apportioned will not be adjusted.
The apportionment factor will be applied to the digital advertising gross revenue received by the taxpayer to compute the revenue attributable to Maryland.
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