Maryland Approves Country’s First Tax on Big Tech’s Ad Revenue

[JamesTheFolf]

Summary

Maryland is the first state in the United States of America, to enact a law that will tax revenue from ads. This tax will only apply to ads that are displayed inside the state. Companies that make more than between a $100 million and $1 billion a year in global revenue will only be taxed 2.5%. However companies that make more than $1 billion a year globally will be taxed at 10%. Both Google and Facebook make more than $15 billion a year globally, so they would both be taxed a a higher rate. The state of Maryland expects this tax to generate ~$250 million a year in revenue for the state. All the money raised by this tax will go to help fund schools in Maryland.

 

Bill Ferguson, president of the Maryland Senate, is the primary champion of a law that will tax tech giants. Photo by Andrew Magnum for The New York Times

 

Quotes

Quote

"The approval signals the arrival in the United States of a policy pioneered by European countries, and it is likely to set off a fierce legal fight over how far communities can go to tax the tech companies.

 

Other states are pursuing similar efforts. Lawmakers in Connecticut and Indiana, for example, have already introduced bills to tax the social media giants. Several other states, like West Virginia and New York, fell short of passing new taxes on the tech giants last year, but their proponents may renew their push after Maryland’s success.

 

The moves are part of an escalating debate about the economic power of the tech giants as the companies have grown, become gatekeepers for communication and culture and started to collect reams of data from their users. In the United States, law enforcement agencies brought multiple antitrust cases against Google and Facebook last year. Members of Congress have proposed laws to check their market power, encourage them to moderate speech more carefully and protect their users’ privacy."

 

My thoughts

I feel like this is going to be a big move in the tech industry. I expect there to be a lot of push back against this law from big tech companies like Google and Facebook. However I feel that this law is justified because tech companies pay very little taxes to state governments. I also this law won't go into affect anytime soon, mostly because of the extreme amount of push back, but I believe it could help fund program that are really needed in the United States.

 

Sources

https://www.nytimes.com/2021/02/12/technology/maryland-digital-ads-tax.html?smid=url-share

[c00face]

The cycle continues. If it goes through, guess who will be indirectly affected, yup... Content creators. Big tech will just find a way to circumvent the law either by how much users get paid on their platform, services, etc... With the amount of power and politicians they lobby, doubt it'll go through.

[porina]

Without looking at the wording of the law, I do wonder if there is a workaround for the giants. Create a separate company within the state to handle the advertising in that state. That company's revenue wold obviously be far smaller than the global revenue and drop to or maybe below the lower threshold. Obviously it would still have to report into and work with the parent company to do its work, but it would be more segregated.

 

If they end up having to pay the higher rate tax, I'm sure it'll be passed onto whoever pays for the ads. If you were advertising, and one area was more expensive than others, then unless you really want to target that area specifically you might exclude it. So just because there's a higher tax rate, doesn't mean there'll be a high revenue to follow.

[Jet_ski]

This actually sounds like a huge misrepresentation on the part of the state or NYT. Because they are taxing the revenue, wouldn’t that just make it a sales tax that’s going to end up directly on the ad buyer’s tab? I don’t think they have the authority to tax a company that’s not physically present there so they are instating a sales tax on ads.

 

I’m not against taxing big tech on their profits. But if this is a sales taxes, it should be called that.

[JamesTheFolf]

20 minutes ago, c00face said:

The cycle continues. If it goes through, guess who will be indirectly affected, yup... Content creators. Big tech will just find a way to circumvent the law either by how much users get paid on their platform, services, etc... With the amount of power and politicians they lobby, doubt it'll go through.

Yeah I understand that, they have so much money they can lobby for whatever they want, and most of the times they will get their way.

 

16 minutes ago, porina said:

Without looking at the wording of the law, I do wonder if there is a workaround for the giants. Create a separate company within the state to handle the advertising in that state. That company's revenue wold obviously be far smaller than the global revenue and drop to or maybe below the lower threshold. Obviously it would still have to report into and work with the parent company to do its work, but it would be more segregated.

 

If they end up having to pay the higher rate tax, I'm sure it'll be passed onto whoever pays for the ads. If you were advertising, and one area was more expensive than others, then unless you really want to target that area specifically you might exclude it. So just because there's a higher tax rate, doesn't mean there'll be a high revenue to follow.

Here is a link I found the the law: SENATE BILL 787

 

16 minutes ago, Jet_ski said:

This actually sounds like a huge misrepresentation on the part of the state or NYT. Because they are taxing the revenue, wouldn’t that just make it a sales tax that’s going to end up directly on the ad buyer’s tab? I don’t think they have the authority to tax a company that’s not physically present there so they are instating a sales tax on ads.

 

I’m not against taxing big tech on their profits. But if this is a sales taxes, it should be called that.

I think it's more of a way to collect income taxes on the revenue companies make in their state.

[porina]

11 minutes ago, jrhaberland said:

Here is a link I found the the law: SENATE BILL 787

Thanks but I'm not lawyer enough to look at it. I'll let highly paid corporate lawyers worry about that detail, since it is they who will have to work out what they can do about it.

[poochyena]

40 minutes ago, jrhaberland said:

Maryland is the first state in the United States of America, to enact a law that will tax revenue from ads.

Do you mean at a higher rate? Because income is taxed regardless source

 

[JamesTheFolf]

1 minute ago, poochyena said:

Do you mean at a higher rate? Because income is taxed regardless source

 

Well tax laws are really complicated, but from what I can read companies don't pay taxes in most states other than sales tax. So this would allow Maryland to collect taxes on the revenue made from ads in their state.

[AnonymousGuy]

 

7 hours ago, porina said:

Without looking at the wording of the law, I do wonder if there is a workaround for the giants. Create a separate company within the state to handle the advertising in that state. That company's revenue wold obviously be far smaller than the global revenue and drop to or maybe below the lower threshold. Obviously it would still have to report into and work with the parent company to do its work, but it would be more segregated.

 

If they end up having to pay the higher rate tax, I'm sure it'll be passed onto whoever pays for the ads. If you were advertising, and one area was more expensive than others, then unless you really want to target that area specifically you might exclude it. So just because there's a higher tax rate, doesn't mean there'll be a high revenue to follow.

Thinking the same.  Separate company handles all the ad revenue and then writes off 100% of the income as an expense to the parent.  Or just raise pricing by 10% and pocket the extra money doing the shell company idea anyways.

 

The bill is 1 page I'm sure there's a dozen ways around it.

[suicidalfranco]

did someone order a Double Irish With a Dutch Sandwich or similar?

[porina]

9 hours ago, jrhaberland said:

Here is a link I found the the law: SENATE BILL 787

Yay mood swings. I clicked and looked at it. It doesn't seem complete, or at least, that only focuses on the definitions of who is or isn't in scope. It doesn't set the thresholds or rates for example.

 

It is interesting for a few reasons.

1, the tax is based on revenue, not profit. Normally taxes are applied to profit. If you don't make a profit you get some slack. Tax on revenue is a tax on existing.

2, there is a paragraph saying words to the effect you can't pass on the cost of the tax!

Quote

A PERSON WHO DERIVES GROSS REVENUES FROM DIGITAL ADVERTISING SERVICES IN THE STATE MAY NOT DIRECTLY PASS ON THE COST OF THE TAX IMPOSED UNDER THIS SECTION TO A CUSTOMER WHO PURCHASES THE DIGITAL ADVERTISING SERVICES BY MEANS OF A SEPARATE FEE, SURCHARGE, OR LINE–ITEM.

Their caps, not mine. To my reading of it, it still doesn't block the ad service from simply charging a higher base fee for the region, just that it can't be separated out. It also does not prevent differential pricing across regions.

3, there is a specific exemption to the tax for traditional TV/radio and news outlets.

 

[SansVarnic]

-= Topic moved to Off Topic =-

Topic is not Tech related. Taxes are political based subjects.

 

On 2/12/2021 at 6:35 PM, jrhaberland said:

... tax will go to help fund schools in Maryland.

This statement is a joke.