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September 2, 2021

Maryland Comptroller proposes regulations for digital advertising tax

On August 31, 2021, the Office of the Comptroller of Maryland (Maryland Comptroller) issued a proposed regulation (proposed Md. Reg. Regulation) outlining how the state's new tax on gross revenues from digital advertising services (DAT) will operate. The DAT is currently scheduled to take effect on January 1, 2022, and will apply to persons with annual gross revenues of at least $100 million globally and at least $1 million of revenue derived from digital advertising services within Maryland.

For purposes of the DAT, "digital advertising services" are defined as "advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services." The Proposed Regulation would clarify issues delegated by the Legislature to the Maryland Comptroller in the original implementing DAT legislation (2020 HB 732),1 including the sourcing and apportionment to Maryland of digital advertising services revenue.

Under the Proposed Regulation, revenues from digital advertising services would be deemed "derived in the State" when any portion of those services are accessed through a device located within Maryland. The revenue would then be apportioned by applying a worldwide, device-based apportionment factor to the global digital advertising services revenue. That apportionment factor would be calculated as a fraction, the numerator of which would be the number of devices that accessed the digital advertising services from a location in Maryland, and the denominator of which would be the number of devices that accessed the digital advertising services from any location. The apportionment factor would apply to digital advertising gross revenue received by the taxpayer to determine the gross revenue attributable to Maryland. In calculating the apportionment factor, devices with indeterminate locations would be excluded from both the numerator and denominator. The Proposed Regulation gives two examples to illustrate how the apportionment factor would be calculated and apply.

Identifying the location of "devices," which EY determined was of particular concern to several businesses that derive revenue from digital advertising services, would be done by taxpayers using "the totality of the data within their possession or control, including both technical information and the terms of the underlying contract for digital advertising services." This means each DAT taxpayer would be required to use the information within its possession or control that most reliably identifies a device's location, including:

  • Internet protocol (IP) data
  • Geolocation data
  • Device registration
  • Cookies
  • Any other comparable information

DAT taxpayers would use this information to determine, based on a totality of the facts and circumstances, whether a device is: 1) in Maryland; 2) not in Maryland, but in the United States; 3) not in the United States; or 4) Indeterminate.

Originally set to take effect for calendar year 2021, the DAT currently is the subject of both federal and state legal challenges.


Affected taxpayers should familiarize themselves with the DAT statute, which is the first digital services tax enacted by any state, and the Proposed Regulations.

Affected taxpayers should review the Proposed Regulation and consider submitting comments, which are due to the Maryland Comptroller by November 8, 2021.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation
   • Karl Nicolas (
   • Scott Roberti (


1 For more on HB 732, see Tax Alert 2021-0343.


Proposed Action on Regulations