Yesterday, the Comptroller of Maryland issued Technical Bulletin No. 59, laying out its position on the Digital Advertising Gross Revenues (ominously abbreviated as “DAGR”) tax base. As the DAGR took effect in January 2022, this guidance is not exactly timely.
Much of Bulletin No. 59 is devoted to the Comptroller’s view of taxability. A Maryland statute defines taxable “digital advertising services” as:
“[A]dvertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services.”
Md. Code Ann., Tax-Gen. § 7.5-101(e)(1).
According to the Comptroller, to be taxable, advertisements must be in a “digital” (i.e., binary digits) format but not necessarily delivered over the Internet. The Comptroller also simultaneously limits the DAGR’s scope, adding two additional criteria for taxable digital advertising receipts: they must be both: (1) programmatic; and (2) conveyed visually. The Comptroller defines the “programmatic” attribute of digital advertising as follows:
“The programmatic attribute of digital advertising refers to the capacity to automate advertising services. Digital advertising is automated, in that it is performed by employing technology that uses computer- or software-driven workflow or machine learning algorithms to deliver advertisements to audiences based on advertiser-defined parameters.”
Thus, non-programmatic advertising services – even if otherwise digital – are not taxable. And, digital advertisements that are “conveyed in a purely audio format” are also not taxable.
As noted above, the timing of Bulletin No. 59 is interesting as the Maryland Tax Court will hear challenges to the DAGR later this month.