Brief of Amici Curiae Tax Law Professors in Support of Appellant (Comptroller of Maryland) in Comptroller of Maryland v. Comcast et al. (the Maryland Digital Advertising Case)

IN THE SUPREME COURT OF MARYLAND, No. 32 September Term, 2022 COMPTROLLER OF MARYLAND (Appellant) v. COMCAST OF CALIFORNIA, MARYLAND, PENNSYLVANIA, VIRGINIA, WEST VIRGINIA, LLC, et al. (Appellees). On Appeal from the Circuit Court for Anne Arundel County, Maryland Case No. 02-CV-21-000509

Indiana Legal Studies Research Paper No. 501

Cardozo Legal Studies Research Paper No. 721

31 Pages Posted: 6 Apr 2023 Last revised: 5 Oct 2023

See all articles by Darien Shanske

Darien Shanske

University of California, Davis - School of Law

Young Ran (Christine) Kim

Yeshiva University - Benjamin N. Cardozo School of Law

Reuven S. Avi-Yonah

University of Michigan Law School

David Gamage

University of Missouri School of Law

Orly Mazur

Southern Methodist University - Dedman School of Law

Aman George

Democracy Forward Foundation

Samara Spence

Democracy Forward Foundation

Date Written: March 31, 2023

Abstract

Professors Reuven S. Avi-Yonah, David Gamage, Orly Mazur, Young Ran (Christine) Kim, and Darien Shanske (collectively, “Tax Law Professors”) write this amici curiae brief in support of the Appellant in COMPTROLLER OF MARYLAND v. COMCAST — the Maryland Digital Advertising Case.

Many digital transactions currently evade sales taxation in Maryland, even though the closest non-digital analogues are subject to tax. Specifically, digital advertising platforms like Respondents obtain vast quantities of individualized data from and on Marylanders in currently untaxed transactions. The scope and value of these transactions is vast and growing, as they allow advertising platforms the lucrative opportunity to sell advertisers precisely targeted, individualized, and verifiable digital access to Maryland residents. Maryland is the furthest along of at least ten states that have in recent years sought to address the substantial problem that much of the modern digital economy is untaxed as compared to traditional commerce, through taxing a proxy for the gap in consumption and building on work by economists seeking to reconcile our tax systems with digital advancements.

Amici here address Respondents’ substantive claims under the Internet Tax Freedom Act (ITFA) and the dormant Commerce Clause. The Circuit Court decision from the bench was cursory, but its essence was that Maryland’s tax discriminates against electronic commerce in violation of the ITFA and against out-of-state businesses in violation of the dormant Commerce Clause. Both holdings were mistaken. As for alleged discrimination against electronic commerce, digital advertising has no meaningful parallel in the non-digital world. It is used differently, has a significantly different impact, and relies on a business model and fee structure that is deeply and fundamentally different from traditional advertising, the most comparable non-digital industry. It is thus not “similar” to any non-digital service for purposes of discrimination under the ITFA. Further, rather than seek to confer an advantage upon non-digital advertising at the expense of a digital counterpart, the state’s policy simply seeks to impose a consumption tax on currently untaxed transactions, unlike those transactions that take place in non-digital markets. As for the dormant Commerce Clause, Maryland’s tax passes muster because it applies only to revenue derived from digital advertising in Maryland. While the tax rate varies depending on a platform’s worldwide gross receipts, that is a reasonable tax practice comparable to progressive income taxes that similarly consider out-of-state income and have been held to be constitutional.

Keywords: digital transactions, Maryland Digital Advertising Case, digital advertising, Comcast, Internet Tax Freedom Act, ITFA, internet service providers, Commerce Clause, tax law, Digital Advertising Tax, Digital Ad Tax, state and local tax, digital tax, digital platforms,

JEL Classification: E62, H2, H20, H25, H26, H3, H7, H70, H71, H73, K00, K34, K10, K20, K22, K23

Suggested Citation

Shanske, Darien and Kim, Young Ran (Christine) and Avi-Yonah, Reuven S. and Gamage, David and Mazur, Orly and George, Aman and Spence, Samara, Brief of Amici Curiae Tax Law Professors in Support of Appellant (Comptroller of Maryland) in Comptroller of Maryland v. Comcast et al. (the Maryland Digital Advertising Case) (March 31, 2023). IN THE SUPREME COURT OF MARYLAND, No. 32 September Term, 2022 COMPTROLLER OF MARYLAND (Appellant) v. COMCAST OF CALIFORNIA, MARYLAND, PENNSYLVANIA, VIRGINIA, WEST VIRGINIA, LLC, et al. (Appellees). On Appeal from the Circuit Court for Anne Arundel County, Maryland Case No. 02-CV-21-000509, Indiana Legal Studies Research Paper No. 501, Cardozo Legal Studies Research Paper No. 721, Available at SSRN: https://ssrn.com/abstract=4409970 or http://dx.doi.org/10.2139/ssrn.4409970

Darien Shanske

University of California, Davis - School of Law ( email )

400 Mrak Hall Dr
Davis, CA CA 95616-5201

Young Ran (Christine) Kim (Contact Author)

Yeshiva University - Benjamin N. Cardozo School of Law ( email )

55 Fifth Ave.
New York, NY 10003
United States

HOME PAGE: http://cardozo.yu.edu/directory/young-ran-christine-kim

Reuven S. Avi-Yonah

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

David Gamage

University of Missouri School of Law ( email )

Missouri Avenue & Conley Avenue
Columbia, MO MO 65211
United States

HOME PAGE: http://law.missouri.edu/person/david-gamage/

Orly Mazur

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

HOME PAGE: https://www.smu.edu/Law/Faculty/Profiles/Mazur-Orly

Aman George

Democracy Forward Foundation ( email )

P.O. Box 34553
Washington, DC 20043
United States

Samara Spence

Democracy Forward Foundation ( email )

P.O. Box 34553
Washington, DC 20043
United States

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