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American Advertising Federation of Baltimore has succeeded in its opposition to a provision in Governor Martin O’Malley’s budget bill that, for the first time, would have taxed digital products and services.
The provision would have imposed a 6 percent tax on digital goods like web videos, software services, sound recordings and apps for newspapers and magazines. Currently, Maryland’s 6 percent sales tax does not cover such products and services.
Cynthia Blake Sanders, chair of the AAF Baltimore. Sanders, along with Ronald Weinholt of the Maryland Chamber of Commerce and Stephen Kranz, on behalf of the regional Digital Goods and Services Coalition, testified against the provision at legislative committees’ hearings.
According to Raquel Guillory, the governor’s spokesperson, “there was never an intention to affect advertising agencies.” After lobbying efforts against the provision, it was being rewritten to clarify the language when the Senate Budget and Taxation Committee voted to reject it.
The governor’s original budget bill, Senate Bill 152/House Bill 87, has been split into a four-bill package. The provision ended up in and was removed from Senate Bill 523. The Senate is expected to debate the resulting bill March 21.
Sanders detailed her objections to the provision in a letter to the governor, writing that “the broad language of [the provision] captures sales of advertising, design and production services provided by AAF Baltimore members.”
There appears to be a movement across the country to tax digital downloads. Guillory says that 30 states tax computer software and 24 states tax digital downloads.
The state estimated the provision would have brought in $5 million in taxes. Sanders disputes that claim, based on numbers provided by the national American Advertising Federation.
Taxes on digital goods “are new and controversial, and there are conflicting laws,” says Sanders, adding that the tax would put Maryland businesses at a disadvantage to their out-of-state competitors.
Sources: Cynthia Blake Sanders, American Advertising Federation of Baltimore; Ronald Weinholt, Maryland Chamber of Commerce
Writer: Barbara Pash