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December 15, 2021

Maryland Comptroller adopts final regulations for digital advertising tax

On November 24, 2021, the Office of the Comptroller of Maryland (MD Comp.) adopted final regulations outlining how the state's new tax on gross revenues from digital advertising services (DAT) will operate (Md. Reg. - (Final Regulations). 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.

The DAT statute defines "digital advertising services" 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."1 The Final Regulations clarify issues that the Legislature delegated to the MD Comp. in the original implementing DAT legislation (MD 2020 HB 732),2 including the sourcing and apportionment to Maryland of digital advertising services revenue.

Under Md. Reg., revenues from digital advertising services are "derived in the State" when a device located within Maryland accesses any portion of those services. The revenue is then apportioned by applying a worldwide, device-based apportionment factor to the global digital advertising services revenue. That apportionment factor is calculated as a fraction, the numerator of which is the number of devices that accessed the digital advertising services from a location in Maryland and the denominator of which is the number of devices that accessed the digital advertising services from any location. The apportionment factor applies 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 are excluded from both the numerator and denominator. Examples provided in the regulation illustrate how to calculate and apply the apportionment factor.

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

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

DAT taxpayers will 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.

The Final Regulations took effect on December 13, 2021.


Potentially affected taxpayers should familiarize themselves with the DAT statute, which is the first digital services tax enacted by any state, and the Final Regulations. Most importantly, any business that derives revenue from digital advertising services should consider assessing their internal data to determine whether they have the capabilities to locate devices that may be accessing their services from within the state.

It should be noted that the DAT currently is the subject of both federal3 and state4 legal challenges.


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


1 Md. Tax-Gen. Ann. Section 7.5-101(e).

2 For more on MD 2020 HB 732, see Tax Alert 2021-0343.The DAT law is generally codified at Md. Tax-Gen. Ann. Sections 7.5-101 to -301.

3 See Chamber of Commerce of the United States of America et al. v. Franchot, Civ. No. 21-cv-410 (U.S. Dist. Ct. Md. N. Div.) (Complaint for injunctive and declaratory relief).

4 See Comcast of California/Maryland/Pennsylvania/Virginia/West Virginia LLC et al. v. Comptroller of the Treasury of Maryland, Case No. C-02-CV-21-000509 (Md. Cir. Ct. Anne Arundel Cty.) (Complaint).