Maryland lawmakers quietly approved HB 732 late last week, which imposes a 10 percent tax for every digital ad sold by companies such as Google and Facebook.

The legislation also applies to smaller companies, but at a lower tax rate based on annual global gross revenues. Businesses with $100 million or more in revenue are taxed at 2.5 percent; 5 percent for $1 billion or more; 7.5 percent for $5 billion or more and 10 percent for companies with $15 billion or more in annual global gross revenues.

While the measure only applies to advertisements shown to Maryland citizens, a “copycat” bill was introduced to New York lawmakers last week. Nebraska is considering a similar measure​​​​​​​. Both the New York and Maryland bill will collect taxes on “digital advertising services,” which include banner ads, search advertising and “other comparable services.”

“This is a first-of-its-kind punitive tax on digital advertising,” Stephen P. Kranz, a D.C.-based attorney and partner at McDermott, Will and Emery, says. “There are a lot of companies in the digital advertising space, some obvious names, but many companies will be impacted by this legislation.”

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