A federal court has permanently blocked Maryland’s “pass-through” ban, closing the latest chapter in the legal fight over the first-in-the-nation digital advertising tax.
A federal district court has permanently blocked Maryland from enforcing its “pass-through” ban — a central provision of the State’s digital advertising tax — finalizing months of litigation and affirming an earlier appellate decision that found the restriction unconstitutional.
On October 15, the US District Court for the District of Maryland entered final judgment in US Chamber of Commerce, NetChoice, and Computer & Communications Industry Association v. Lierman, ruling that the so-called “censorship provision” of the Digital Advertising Gross Revenues Tax violates the First Amendment and permanently enjoining the State from enforcing it.
Background on the Digital Ad Tax
Enacted in 2021 after a gubernatorial veto override, Maryland’s digital advertising tax applies to companies earning more than $100 million in global annual revenue, with rates ranging from 2.5% to 10%, depending on worldwide earnings.
The Department of Legislative Services projected the tax could generate up to $250 million annually, with revenues dedicated to the Blueprint for Maryland’s Future, the State’s multi-year education reform plan.
One of the most controversial provisions — the “pass-through” ban — prohibited companies from itemizing or disclosing the cost of the tax to customers on invoices, bills, or contracts. Businesses could raise prices to offset the tax, but could not directly attribute those increases to the State levy.
The Constitutional Challenge
As previously reported on Conduit Street, in August 2025, the US Court of Appeals for the Fourth Circuit struck down the “pass-through” restriction, holding that it imposed a content-based limitation on speech and violated the First Amendment.
The court concluded that Maryland could not “shield itself from criticism by preventing companies from explaining the consequences of a new tax.”
That ruling returned the case to the district court for a final order. The October 15 judgment now cements that decision, permanently prohibiting the Comptroller and her successors from applying the restriction in any form.
What’s Next
The broader digital advertising tax remains on the books, though the State can no longer enforce the disclosure ban. A separate case before the Maryland Tax Court continues to test whether the tax itself violates federal law or the US Constitution’s Commerce Clause.
Counties do not receive revenue from the digital ad tax, but the case underscores the volatility of Blueprint funding sources that rely on uncertain or legally contested revenues.
Stay tuned to Conduit Street, as MACo will continue to monitor developments as Maryland’s courts and policymakers determine the long-term future of the digital advertising tax and its role in education funding.
Previous Conduit Street Coverage
Fourth Circuit Strikes Down “Pass-Through” Ban in Maryland’s Digital Ad Tax
Federal Court Upholds Maryland’s Digital Ad Tax
MD Supreme Court Reverses Lower Court, Upholds State’s Digital Ad Tax
