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Maryland To Become First State To Tax Online Ads Sold By Facebook and Google. (npr.org) 79

Posted by msmash from the shape-of-things-to-come dept.
schwit1 writes: With a pair of votes, Maryland can now claim to be a pioneer: it's the first place in the country that will impose a tax on the sale of online ads. The House of Delegates and Senate both voted this week to override Gov. Larry Hogan's veto of a bill passed last year to levy a tax on online ads. The tax will apply to the revenue companies like Facebook and Google make from selling digital ads, and will range from 2.5% to 10% per ad, depending on the value of the company selling the ad. (The tax would only apply to companies making more than $100 million a year.)

Proponents say the new tax is simply a reflection of where the economy has gone, and an attempt to have Maryland's tax code catch up to it. The tax is expected to draw in an estimated $250 million a year to help fund an ambitious decade-long overhaul of public education in the state that's expected to cost $4 billion a year in new spending by 2030. (Hogan also vetoed that bill, and the Democrat-led General Assembly also overrode him this week.) Still, there remains the possibility of lawsuits to stop the tax from taking effect; Maryland Attorney General Brian Frosh warned last year that "there is some risk" that a court could strike down some provisions of the bill over constitutional concerns.
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Maryland To Become First State To Tax Online Ads Sold By Facebook and Google. More

Maryland To Become First State To Tax Online Ads Sold By Facebook and Google.

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  • I know how to get around this. (Score:4, Insightful)

    by h33t l4x0r ( 4107715 ) on Thursday February 18, 2021 @06:10AM (#61075428)
    I remember driving to New Hampshire to avoid sales tax on beer. We'll just hire more interns.
    • If you're using cheap interns to offset the cost, wouldn't they have already hired all the interns they could to save that money in the first place? Or is there a scam I don't see, like a tax break for hiring interns? But again, wouldn't they have already done that for the tax break?

  • Pass it on (Score:3)

    by petes_PoV ( 912422 ) on Thursday February 18, 2021 @06:43AM (#61075462)

    The tax will apply to the revenue companies like Facebook and Google make from selling digital ads

    So what is to stop Google and others from simply raising their advertising rates in Maryland?
    With their market dominance, it isn't as if they will lose much business.

    • Re: (Score:2)

      by Meneth ( 872868 )

      As I recall, you don't usually purchase a set number of advert exposures, but rather you set a fixed budget and then let the adverts run until that budget is exhausted, at which point they automatically stop.

      If advertisers don't consider Maryland especially when making their purchases (and really, who would? ;), the average gross income to Goobook would not change noticeably, but the net income would drop due to these taxes.

    • So what is to stop Google and others from simply raising their advertising rates in Maryland?

      If advertisers have to pay more, each ad's profitability drops, and they place fewer of them.

      Ads are only one way for a business to attract customers. Other ways are to use the money they would otherwise spend on ads to reduce prices or improve the quality of their product or service.

      Google has priced their ads to maximize profits. If they could make more money at a higher price, they would already be doing it.

      • Re: Pass it on (Score:5, Insightful)

        by simlox ( 6576120 ) on Thursday February 18, 2021 @07:27AM (#61075524)
        Ads are only one way for a business to attract customers. Other ways are to use the money they would otherwise spend on ads to reduce prices or improve the quality of their product or service.

        So if we just outlaw commercials, we will get better and cheaper products overall?

        • So if we just outlaw commercials, we will get better and cheaper products overall?

          Yes.

        • Re: (Score:2)

          by e3m4n ( 947977 )
          no, because banning commercials re-levels the playing field again. So you have to compete for business another way and that usually winds up in the form of production costs. Thats why so much cheap chinese shit that is not even designed to be repaired. I bet landfills have grown exponentially in the last 25 years. I suspect the second step after we get the first nano assembler will be to make a nano disassembler to break all the trash in the landfills back down to its base elements or compounds.
        • Yep, ads are a Tragedy of the Commons. If no one advertised then all that savings would be somehow passed on to the customer with better products or lower prices. The problem is that if one company starts advertising, their competitors have to also advertise to stay competitive.

      • "Other ways are to use the money they would otherwise spend on ads to reduce prices or improve the quality of their product or service."

        Yea but who the fuck has time for that shit.

  • If they were to slap a tax on all advertising, they might get away with it, but singling out internet advertising? Nope, this is just a court loss passed by a legislature wishful of more money. It's also a tax on advertisements targeted at Maryland, i.e. mostly local Maryland businesses. Can't they just tax them directly, instead?

    Oh, but then the game would be up and people would see it for what it was, raising local business taxes in an already down economy because of government shutting business down for COVID.

    • regular advertising get taxed at a higher rate.
      I don't understand why online ads would get a discount.

    • They'll likely challenge the Act (Score:5, Interesting)

      by rsilvergun ( 571051 ) on Thursday February 18, 2021 @09:09AM (#61075782)
      FB, Google et al are looking at increased regulation. My guess is both will keep their heads down, pay the tax, and buy off local MD politicians with fat sacks of cash to get the tax repealed in the next session. If they do a court case it just gets everything in the news, and right now both left and right wings in America want to go after them. So they'll keep their heads down and bribe away.

      • Re: (Score:2)

        by tflf ( 4410717 )

        FB, Google et al are looking at increased regulation. My guess is both will keep their heads down, pay the tax, and buy off local MD politicians with fat sacks of cash to get the tax repealed in the next session. If they do a court case it just gets everything in the news, and right now both left and right wings in America want to go after them. So they'll keep their heads down and bribe away.

        This is a damned if you do, damned if you don't situation for FB, Google et al (aka FBGetal). Other jurisdictions, if the option you propose is followed, will jump on the regulatory bandwagon, encouraged by the fact taxes are being paid, and bribes are to be had.
        If FBGetal decides to challenge instead of pay, other jurisdictions will file briefs in support of Maryland. Various levels of government, especially outside the USA, will go ahead and introduce their own tax laws.
        Governments everywhere want/need/e

    • The summary and article are misleading - the actual text of the bill is a regressive tax on local business.

  • So near, yet so far away... (Score:5, Insightful)

    by Joce640k ( 829181 ) on Thursday February 18, 2021 @06:49AM (#61075470) Homepage

    What we really need is two tax tiers, one for non-targeted ads and another (much higher) one for targeted ads.

    eg. 10% for non-targeted, 30% for targeted.

    Let's see how much stealing our privacy is really worth.

    • For a while my website wasn't showing personalized ads. The revenue dropped by more then 50%.

      • Your business model isn't our problem.

        • Re: (Score:1)

          by Anonymous Coward
          I think you misunderstood the point of doconnor's post. Or maybe I am. I took their post as saying "only 30%? That'll be well worth it".

    • Why?

      The problem with targeted ads is that they incentivize a creepy level of data collection. That incentive for Facebook, Google, et al. to collect your data doesn't go away just because targeted ads are slightly more expensive than their non-targeted counterparts.

    • Re: (Score:2)

      by jdoeii ( 468503 )

      The performance of targeted vs non-targeted ads could easily be 10 to 100x. A 20% difference in tax rate is irrelevant.

  • tldr. not sure why ad sales are not taxed.. arent all sales?

    • Because it is free speech. Just like the fact I don't charge sales tax when doing consulting work.

      • How is it free speech if you're paid for it?

      • Wrong. It's only because the tax code is outdated. You do pay taxes on printed newspapers or boxed software.

      • Re: (Score:2)

        by AuMatar ( 183847 )

        Free speech means you can say whatever you want and the government can't stop it, not that it can't be taxed. Book sales are taxed, newspaper sales are taxed, etc.

        Also, you may be breaking the law with your consultancy, many states do charge sales tax on that. I'd discuss it with your accountant.

    • Re: (Score:3)

      by Entrope ( 68843 )

      No, not all sales are taxed. California has a web page describing when sales tax applies to advertising goods (https://www.cdtfa.ca.gov/lawguides/vol1/sutr/sales-and-use-tax-regulations-art4-all.html); in short, "it's complicated", and there are several apparent loopholes. However, the rules are clear that hosting a web site is an untaxed service, and also thay payment to place advertisements is not taxable.

      More broadly, there are lots of other cases where a sales tax regime, like the US uses, does not ta

    • on top of existing sales tax.

    • Re: (Score:2)

      by e3m4n ( 947977 )
      depends on the state, but services typically are not subject to sales tax. Only the sale of property. So cutting your hair or nancy pelosi's constant botox injections are not taxed but the salon brand shampoo her hairdresser sells her is taxed. Clear as mud? When I was stationed in CT in the 80s, a stones throw from Taxachusetts, MA did not charge sales tax on food or clothing. So that designer denim jacket sold at American Eagle in the mall (the jackets nor the store exist anymore) was tax-free. Other stat
  • make those spammers pay to trash websites with adveritsing, maybe it will drive them off the internet and back on to TV, radio and highway billboards
  • I don't see a problem with this. The tax code is lagging behind the technology and this adjustment makes it more in line. Makes sense to me to align taxation of digital and physical goods.

  • Flawed Tax System (Score:5, Interesting)

    by ytene ( 4376651 ) on Thursday February 18, 2021 @07:50AM (#61075576)
    There may be a problem with this bill, in that Maryland might have a problem with jurisdiction.

    What happens if Facebook, Google et all set up infrastructure so that when a Maryland native loads a page containing their ads, that the code which forms and publishes the page [since content is generated on-the-fly] detects that the user is based in Maryland [using IP address, for example] and serves them ads from outside US waters.

    There's nothing illegal in that. US citizens access foreign web sites that carry ads all the time.

    But where are Maryland going to go in order to collect the tax they believe they are due? The big platforms now have enough infrastructure in different countries to do this, just to make the point.

    A much better way to resolve this might actually be to start with international tax law. If nations could agree that they would stop allowing multinational companies to arbitrarily change the terms of on-line purchases to move the "transaction location" to some random destination "for tax purposes", then this would stop the big multinationals from international tax avoidance.

    Then it would be possible to enact something similar at a state level, so that the action of serving an on-line add - much like completing an on-line transaction - takes place where the end user is located . The one key challenge to this is technological in nature: whilst it is relatively easy to establish the location of an end user between nations [because of the way IP addresses are allocated] it is going to be technically harder to do this between states, at least until the FCC can enact legislation requiring telcos to be able to identify the location of end users based on IP address, down to a state level.

    These big companies are using loopholes in tax laws to pay no tax - which means they can undercut and crush the competition. This has to be stopped.
    • Exactly this. And expect other ad platforms to start pushing their ads to MD residents through VPN servers in other countries. If the big media guys can't stop people torrenting over VPNs, how are the dummies in Annapolis going to deal with that level of encryption and obfuscation when they try to send the their bill? If anything, when they drive it underground, the system will be abused even more.

    • Re:Flawed Tax System (Score:5, Interesting)

      by bradley13 ( 1118935 ) on Thursday February 18, 2021 @08:40AM (#61075684) Homepage

      IANAL, but legally, jurisdiction is not a problem. Enforcement is the problem.

      If a product or service is delivered in Maryland, it doesn't matter where it was produced. Widget made in China? Sold in Maryland? Sales tax is due. Now, collecting that tax is the problem. As long as the companies have offices in the country, enforcement should be possible. If enough money is involved, it will be worth the effort.

      What I don't understand is: how do they intend to count the number and prices of ads displayed. They cannot just trust the companies to deliver good numbers - indeed, I'm not sure that the companies are even capable of this level of reporting. Ads are auctioned, every price is different, and you have to trace this to IP addresses in a geographical region, accounting for ad-blockers and proxies? Good luck with that.

      • Re: (Score:2)

        by ytene ( 4376651 )
        I understand your challenge - you make perfect sense. But my observation here is - to borrow from your language - what if Facebook turn round to Maryland and say, "The service is not delivered in the State of Maryland. The "service" is *delivered* where the page that is *sent to your Maryland user across the internet* is assembled and published."

        This is exactly how Amazon and Faecesbook [sic] get out of paying any Corporation Tax in other countries - they claim that their services are either delivered fr

        • Sounds like B.S. to me, and I can only assume corruption was involved if such a position has actually been given official approval in some jurisdictions.

          If you're talking any physical good, it is obviously delivered at the location of the recipient. If I send you a letter it can't possibly be considered delivered until you receive it - which can only happen where you are. If I send an email, again, you can only receive it where you're actually physically located, regardless of how many "hops" it may make

          • Re: (Score:3)

            by ytene ( 4376651 )
            I'm sorry if this comes as a disappointment, but this is actually being used by multinationals, today.

            For example, say you live or work in the UK. You go to the "amazon.co.uk" web site and order something. The product you order is shipped from a UK warehouse, sent via a UK courier and delivered to your door.

            The order details/acknowledgement will clearly state, "Sold by Amazon EU S.a.r.L."

            In case you're unfamiliar with the acronym, "S.a.r.L." is short for "Société à responsabilit

            • Being used does not mean it's not B.S. There's LOTS of B.S. made law to profit those with political influence.

              It would be a relatively simple matter to define in law that all sales tax is owed at the point of physical delivery. And that all computer services are provided at the location of the consumer. Etc.

              Things don't work that way because governments by and large do not serve the people, or even the nation, but the interests of those with the power to influence politicians.

      • Jurisdiction may be a problem because the Constitution gives the Federal government rather than the states the power to regulate interstate commerce. If a company in another state is selling advertisements to a company in Maryland, that's interstate commerce. If a widget is made in China and purchased by someone in Maryland, sales tax is only due if the company making the sale was also in Maryland. Otherwise Maryland has no jurisdiction to collect the sales tax.

      • IANAL, but legally, jurisdiction is not a problem. Enforcement is the problem.

        Good point. Maybe that's why the proposed tax is aimed at large companies like Facebook and Google. These companies need to convince shareholders that they are selling lots of ads. So, they will have to balance the impacts on the stock price versus taxes paid.

    • Laws like this are band-aids over the lack of a single USA tax code, which itself would only be a band-aid on what is really needed: a global tax code.

      The problem is that any country that elects to not sign up to a global tax code immediately becomes incredibly attractive to the tax-dodgers, and there will always be at least one unscrupulous country that does this in order to enrich itself at the expense of everyone else.

      So practically, tax loopholes and the abuse thereof will continue until there is a sing

      • Thanks, but I prefer a politically fragmented world where there's at least some hope that personal freedom may eventually win out over the crony-capitalism that has currently conquered most of the world.

        The problem is not that there are countries with that set low corporate tax rates to invite "tax haven shopping" - the problem is that the laws in other countries are written to allow such dodges. Change the law to define all sales as occuring at the point of delivery, and ban all vendors that don't collect

        • Re: (Score:2)

          by ytene ( 4376651 )
          I understand your sentiment here, but I have this suspicion that you have fallen in to a deliberately-planted trap.

          You're considering the options as binary: either have a system in place where multinationals dodge taxes, or have one where your personal freedoms get eroded thanks to crony-capitalism.

          That's a false choice. That's propaganda disseminated by the people that are taking advantage of these systems. This is the same tactic that we see given out in opposition to "free at the point of use" heal

          • There are simple and fair ways that much of the abuse could be eliminated.

            If there were simple ways to do it, it would be done. The problem is that for everyone proposing such a "simple way", there are ten lawyers looking at the law for the loopholes.

            The net effects of which would be that billionaires would pay more tax and we would pay less.

            Don't fall for that mental trap, either. It MIGHT result in billionaires paying more, but it will NOT result in you paying less. What'll happen is the billionaires

            • >If there were simple ways to do it, it would be done.

              What makes you think that? Just because something is simple, and even popular, doesn't mean it will be done - there's LOTS of simple laws with widespread (70-80+%) popular support that have not happened. Looking at what laws actually get proposed and passed there is one overriding concern behind almost all of them: does it benefit the rich and powerful?

              There is some conflict between what different factions think will benefit them, but neither popula

    • that's how this works and it's why they have jurisdiction. I haven't looked by the tax might even be paid by the local business rather than Google/FB. Doesn't matter, since either way it increases the cost of using their advertisements.

      They may run afoul of some of the laws about Internet taxation but I doubt it. Many of those laws have been allowed to expire and even if they haven't FB & Google won't want to draw attention to themselves with a lawsuit. I mentioned it elsewhere, but they'll keep the

      • Re: (Score:2)

        by MobyDisk ( 75490 )

        The original tax that was vetoed "would have imposed rates of up to 10 percent on digital advertising served to Marylanders" so it was the serving of ads not the purchasing. Although the more recent npr article on the new bill doesn't provide enough detail to know.

    • The end user's location doesn't matter. The bill taxes advertisers based on where the revenue is derived, which is where the buyer of the ads is located. For odd cases like what if wal-mart buys ads, the bill leaves it up to the comptroller to figure out what percentage of wal-marts ad spending should be allocated to MD.

  • Ferguson and Del. Eric Luedtke have also sponsored legislation this year to prohibit companies from passing the tax onto customers through fees, surcharges or line items. Opponents say the companies will figure out a way to work around those prohibitions, while Democrats say they are willing to call the bluffs of the tech giants.

    They want to have their cake and eat it too. They know that MD-based businesses would shoulder this burden, so they're trying to force two California-based businesses to eat the cos

  • So, this is basically a corporate sales tax. As long as it is in line with taxes on other corporations doing business, it's absolutely fine.

    For me the big question is: how can they measure and enforce this? How can the State of Maryland have any idea how many ads were displayed in the state, and who sold those ads? I'm not even sure how the companies can come up with reliable numbers, much less how the authorities can check.

    • Re: (Score:2)

      by Entrope ( 68843 )

      Suppose a company in Arizona buys an ad from an advertising network based in Nebraska that places an ad with California-based Google, served to a person in Georgia who uses a VPN endpoint in Maryland. Which state(s) get to tax the ad? Can any others regulate the commercial aspects of it, for example to enforce "truth in advertising" laws?

  • Maryland will also be the state that makes ad-blockers illegal.
    Can't have people block the IRS.

    • The tax is on selling ads, not seeing ads, and the IRS doesn't collect Maryland state taxes.

      How did your knee jerk so hard in defense of Facebook that you fit that many errors into that few words? Seriously, think about it. You've been manipulated.

  • That's what some countries (France leading a small pack of other european countries) have been trying to do for a while, i.e. tax GAFAs according to where the money is being made (where the end user is). But the US is braking with all fours and applying reprisals against it (the usual extra taxes on cheese/wines/mustard...)

    Guess that this will finally catch on if individual states start doing it too.

  • Interstate Commerce law. (Score:3)

    by Fly Swatter ( 30498 ) on Thursday February 18, 2021 @08:47AM (#61075710) Homepage
    will likely kill this.

  • Taxing digital advertising sold to Maryland residents/businesses is one thing, taxing advertising served to them makes literally none. They're taxing financial activity which takes place in another jurisdiction, and they don't have the right to do that as the feds control interstate commerce.

    It would likely be more legal to simply prohibit showing ads to Marylanders at all.

  • The tax would only apply to companies making more than $100 million a year.)

    Thanks for contacting Facebook Maryland, a subsidiary of Facebook, for your advertising needs. This state is not big enough for us to rake in $100M so we don't charge tax on ads.

  • 1. Is sales tax collected on Ad sales? For example if a restaurant buys Google ads, do they pay sales tax on it? Hypothetically speaking if a Maryland based business buys Google Ads, do they pay Maryland sales tax? If this is the case, it looks like Maryland is already getting it's cut.

    2. Maryland is taxing based on if the viewer of the ad is in Maryland. So let's take a weird example. A company have no business presence in Maryland selling supplements places an Ad that is seen by Maryland residents. It sou

  • Everyone on here is talking about how to tweak states, national, or even international laws so that more taxes can be collected FROM THE EVIL BIG CORPORATIONS BY GOD WE'LL SOCK IT TO THOSE FUCKERS. They seem to forget where the money will come from: all prices will go up for CONSUMERS in order to pay this tax.

  • ... suddenly became a cost effective means of advertising. Start putting them up.

  • I live in Maryland. Humorous mottoes here are variations on "Live Taxed and Die", and "Welcome to Maryland. Now give us your paycheck." The point being, if there is a way for the Maryland state government to tax something, they will. They even tried to tax rainfall a few years back. (https://www.forbes.com/sites/travisbrown/2014/01/03/when-it-rains-it-pours-tax-dollars-in-maryland/?sh=246e20b37c69)

    As you might expect, there's a local TV ad war going on in the state now fighting the proposed online ad tax. T

  • The full lifecycle and text of this bill can be found here: https://mgaleg.maryland.gov/mgawebsite/legislation/details/hb0732?ys=2020rs [maryland.gov]

    First off: The digital advertising tax wasn't originally in the bill. Legislators co-opted a bill taxing tobacco products and added the digital ad language almost a month after the text was first introduced.

    Second: There had been news reports that legislators were going to add language to prohibit pass-through of the tax to ad buyers. maryland.gov doesn't show any introduce

  • Annapolis, Maryland

    It is a surprise to many that this tiny state nestled on the Eastern seaboard has a government composed of Maude Flanders, Helen Lovejoy, Fat Tony, Chief Wiggum and Edna Krabapple.

    Few members of the state legislature have ever held a legitimate job in the private sector or had a sexual encounter lasting longer than five minutes. They certainly do not have any qualifications to govern, and it shows.

    Maryland already made the legal textbooks for legal stupidity. https://www.nytimes.com/200 [nytimes.com]

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