Maryland's digital advertising services tax¹ (DAT) applies to Maryland receipts derived from the provision of digital advertising services within the state. It went into effect in January 2022, with the first returns and estimated payments due on April 15, 2022. The tax currently faces challenges in federal court on grounds that it violates the First Amendment, and in state court on grounds that it violates the US Constitution and federal law — namely, the Internet Tax Freedom Act. The federal challenge is currently before the US Court of Appeals for the Fourth Circuit, and the state challenge is currently before the Maryland Tax Court. Neither case is expected to be resolved until late 2025 at the earliest.

While the Comptroller has not yet specified the statutory refund period for the DAT, Maryland applies a three-year statute of limitations for most tax refund claims.² Based on the language in the law,³ the three-year period appears to apply. Accordingly, the statute of limitations period for the first estimated payments is set to expire on April 15, 2025.

If either the state or federal court ultimately declares the tax invalid, it is not clear to what extent refunds would be allowed retroactively for periods outside of the statute of limitations. As a general rule, the Due Process Clause of the Fourteenth Amendment requires states to provide "meaningful backward-looking relief to rectify any unconstitutional deprivation."⁴ This principle, however, often is weighed against a state's interest in maintaining fiscal solvency to prevent undue hardship to its citizens.⁵ Furthermore, the form of "meaningful backward-looking relief" may not necessarily take the form of cash refunds.

Given that Maryland is facing an anticipated $2.7 billion budget shortfall for 2025, the potential exists that if the DAT is struck down, the state will not apply the decision retroactively to nonlitigants or limit, in some way, the availability of cash refunds. Accordingly, any taxpayer that paid estimated DAT beginning in April 2022 should consider filing a protective refund claim before April 15, 2025, to retroactively preserve their rights to any refunds that may ultimately be determined.