Which States Are Moving to Tax Digital Advertising Revenue?

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States are looking more closely at digital advertising as they reconsider how existing tax systems apply to an economy increasingly built around data, online platforms and targeted marketing. Maryland opened the door with the nation’s first tax specifically aimed at digital advertising revenue, but litigation has complicated that approach.

In 2026, Illinois and Utah enacted new targeted-advertising taxes, Washington continued taxing advertising services under its expanded sales tax, and lawmakers elsewhere considered additional approaches.

What Is a Digital Advertising Tax and Why Are States Pursuing One?

A digital advertising tax generally imposes tax on revenue earned from delivering advertising through websites, applications, search engines, social media platforms or other digital interfaces. Some states are moving away from explicitly taxing “digital” advertising and instead defining taxable activity around targeted advertising, data usage or advertising services more broadly. These taxes are fundamentally different from income-tax concepts such as Global, Intangible, Low-Taxed Inclusion (GILTI). Rather than taxing corporate income, states may tax gross receipts or transactions associated with advertising delivered to customers or users within their borders. The result is a developing patchwork of rules rather than a single state model.

Where Does Maryland’s Digital Advertising Tax Stand After the Supreme Court Ruling?

The Maryland digital advertising tax applies rates from 2.5% to 10% to Maryland digital-advertising receipts, with the rate determined by a company’s global annual gross revenue. Companies generally enter the regime at $100 million of global revenue and $1 million of Maryland digital-advertising revenue.

The Supreme Court of Maryland revived the tax in 2023 on procedural grounds without deciding its constitutionality. On August 14, 2026, however, the Maryland Tax Court ruled against the tax in the Apple, Google and Peacock TV cases and ordered refunds with interest. The Comptroller sought judicial review in September, so the litigation remains active.

Maryland’s structure is an important example of how State Gross Receipts Taxes can encounter constitutional and federal statutory questions when tax rates depend partly on worldwide activity.

Which Other States Have Considered or Enacted Digital Advertising or Digital Services Taxes?

Illinois and Utah enacted major targeted-advertising measures in 2026. Illinois’ SB 3019 imposes a 10% tax on gross receipts from targeted advertising services delivered to Illinois users beginning January 1, 2027. Utah’s SB 287 also begins in 2027 and applies when a business has at least $1 million of Utah targeted-advertising receipts, $100 million of targeted-advertising receipts overall, and at least 50% of total receipts from targeted advertising.

Washington took another route. Since October 1, 2025, advertising services, including many digital services, have been subject to retail sales tax. Tennessee lawmakers also considered 2026 legislation that would have expanded sales tax to advertising services purchased by businesses with at least $100 million of annual revenue, but the proposal did not advance beyond committee consideration.

Together, these approaches show that a digital services tax does not necessarily arrive under that name.

How Is the Taxable Base Calculated and Which Companies Are Subject to It?

The taxable base varies substantially by state. Maryland taxes digital advertising gross revenues derived from services in the state, with rates ranging from 2.5% to 10% based on a company’s global annual gross revenues. The Maryland apportionment method uses the number of devices accessing digital advertising services from Maryland compared with devices accessing those services from all locations.

Utah uses an impression-based apportionment approach. The taxable Utah amount is calculated by multiplying a company’s total targeted-advertising receipts by the percentage of its advertising impressions delivered to audiences or individuals located in Utah

These differences make multistate sourcing particularly important because the same advertising campaign can potentially create different tax consequences depending on where users, customers and impressions are located.

How Should Businesses With Digital Advertising Revenue Be Planning Now?

Businesses generating advertising revenue across multiple states should first identify exactly what they sell. Programmatic advertising, search advertising, lead generation, targeted advertising and broader marketing services may be treated differently from traditional media or other advertising services.

Next, companies should map revenue and advertising impressions by state, compare those amounts with applicable revenue thresholds, and determine whether their systems capture the location information required for apportionment. They should also review contracts and invoicing because states differ on whether taxes may be separately stated or passed through to customers.

Finally, businesses should monitor legislation and litigation as part of their broader state and local tax process. The Maryland litigation and the 2027 effective dates in Illinois and Utah make 2026 an important year for evaluating exposure before filing obligations begin.

How BT Can Help

For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Bennett Thrasher’s State and Local Tax (SALT) practice, or call us at 770.396.2200.

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