Fourth Circuit Strikes Down Maryland Digital Ad Tax Speech Ban

Imagine your company gets hit with a brand-new tax. You do what businesses have done since… well, taxes were invented:
you adjust prices. Then you try to explain the change to customers with a simple line on an invoicesomething like
“Maryland Digital Ad Tax.” Normal, transparent, boring.

Maryland’s Digital Advertising Gross Revenues Tax (DAGRT) tried to make that last part illegal. Not the price changethe
talking about it in the most obvious place customers look: the bill.

On August 15, 2025, the U.S. Court of Appeals for the Fourth Circuit struck down Maryland’s “pass-through” prohibition
the part of the digital ad tax law that effectively muzzled companies from itemizing or explicitly attributing charges to
the state’s tax through a separate fee, surcharge, or line item. Translation: the government can tax you, but it can’t
gag you from truthfully saying “this tax is why your price changed.”

This ruling is a big deal for anyone who cares about price transparency, political accountability, and the First
Amendment’s general vibe of “no, the state does not get to hush you because it might look bad.”

Key Takeaways (For People Who Read Invoices Faster Than Case Law)

• The Fourth Circuit didn’t erase Maryland’s digital ad tax. It targeted the law’s speech-restricting “pass-through” ban.
• The court treated the restriction as a content-based speech rulemeaning it’s presumptively unconstitutional unless Maryland can justify it under demanding scrutiny.
• Maryland’s best justification didn’t survive even intermediate scrutiny, because the ban was wildly underinclusive: you could raise prices, you just couldn’t say why in certain formats.
• Practically, companies gained breathing room to itemize and explain tax-driven price changes in customer communicationsespecially invoices.
• The larger legal fight over the tax itself continues elsewhere, but the “don’t you dare mention the tax” rule got tossed.

What Maryland Built: A First-in-the-Nation Digital Ad Tax

What the DAGRT taxes (and who gets pulled into the pool)

Maryland’s DAGRT is often described as the first statewide tax in the U.S. aimed specifically at revenue from digital
advertising services. It was enacted in 2021 (over a gubernatorial veto) and took effect January 1, 2022.

The basic structure: if a company is large enough globally and earns enough from digital advertising associated with
Maryland, it owes a tax on the portion of its digital advertising gross revenues attributed to Maryland. The law uses
gross revenue (not profit), which matters because “gross” is the tax equivalent of ordering dessert first and then
being surprised the bill is higher.

Rates: tiered, global-revenue-based, and not shy

The tax rate is graduated and tied to a company’s global annual gross revenues, with tiers that range from
2.5% up to 10%. Bigger global revenue generally means a higher rate. In policy terms, Maryland was signaling:
“If you’re huge, you can handle a bigger slice.”

Maryland legislators and fiscal analysts projected the tax could raise about $250 million per year, with revenue
directed to education funding under the Blueprint for Maryland’s Future framework. In other words: the DAGRT was designed
as a serious revenue streamnot a symbolic fee tossed in the couch cushions.

The “pass-through” provision: where taxes meet a gag rule

Here’s the part that triggered the First Amendment fireworks: Maryland added a “pass-through” prohibition stating that a
taxpayer may not “directly pass on the cost of the tax” to a customer by means of a separate fee, surcharge, or line item.

Read that carefully. The law didn’t say, “You may not raise prices.” It said you may not raise prices in a way that
openly identifies the tax in certain invoice-style formats. That’s not a pricing rule so much as a “please don’t mention
the thing” ruleespecially not where the customer is guaranteed to notice.

The Case That Landed in the Fourth Circuit

Who sued, and what they argued

Trade groups including the U.S. Chamber of Commerce, NetChoice, and the Computer & Communications Industry Association
challenged the law in federal court, focusing (for this particular appeal) on the pass-through restriction. Their core
point: Maryland can impose a tax, but it can’t forbid companies from communicating truthful information about that tax to
customersespecially when the speech assigns political accountability (“This price went up because Maryland did this.”).

The procedural detour: “Is this even the right court?”

Early litigation involved threshold questions about federal court jurisdiction and tax-related doctrines that often push
disputes into state processes. In an earlier Fourth Circuit decision (sometimes referred to as “Chamber of Commerce I”),
the court concluded the Tax Injunction Act did not bar the First Amendment challenge and sent the case back for a merits
decision.

The district court’s middle-ground approachand the appeal that followed

On remand, the district court agreed the provision burdened speech but concluded it wasn’t facially unconstitutional
because it could have constitutional applications. The plaintiffs appealed again, and that set the stage for the Fourth
Circuit’s 2025 ruling.

What the Fourth Circuit Held on August 15, 2025

Step 1: The court called it speech regulation, not conduct regulation

Maryland tried to frame the pass-through ban as a regulation of conduct: “We’re just making sure businesses don’t shift
responsibility for paying the tax.” But the Fourth Circuit examined what the provision actually did in practice.

If companies can legally raise pricesand they canthen Maryland isn’t stopping the economic reality of pass-through.
Instead, it’s restricting how businesses communicate price changes and tax attribution. That is classic speech
territory.

Step 2: The court treated it as a content-based restriction

A law is “content-based” when it treats speech differently depending on what it says. The pass-through ban didn’t forbid
invoices. It didn’t forbid line items generally. It forbade a specific kind of message conveyed in specific formats:
identifying and attributing the tax through a fee/surcharge/line-item mechanism.

Content-based laws are presumptively unconstitutional. They typically must survive strict scrutiny (the legal equivalent
of trying to win a wrestling match while wearing roller skates). Maryland argued for a lower standard by suggesting the
speech was commercial. The court didn’t need to fully settle that debate because the restriction failed even under
intermediate scrutiny.

Step 3: Underinclusiveness sank Maryland’s justification

Maryland’s claimed interest was that businesses should bear “economic and legal responsibility” for the tax. But the law
let companies raise prices in ordinary ways; it only blocked certain disclosure formats. As the Fourth Circuit reasoned,
if your goal is truly to stop customers from paying more, banning line items doesn’t do itcustomers still pay if prices
rise. And if your goal is legal responsibility, an invoice doesn’t transfer the legal obligation to pay the state.

That mismatch mattered because it suggested the ban wasn’t about economic/legal responsibility at all. It looked more
like a rule designed to prevent companies from spotlighting the government’s role in price increasesi.e., to reduce
political blowback.

The court was blunt: avoiding voter anger is not a valid interest that can justify a speech ban.

Step 4: The court held the provision facially unconstitutional

A facial ruling is broad: it means the provision is unconstitutional in all (or essentially all) its applications. The
Fourth Circuit concluded the pass-through restriction had “no constitutional applications” and therefore could not stand.

Important: What the court did not decide

The Fourth Circuit’s 2025 opinion addressed the First Amendment problem in the pass-through ban. It did not resolve every
other ongoing challenge to the tax’s structure (including arguments tied to federal preemption theories or constitutional
limits on state taxation). Those broader issues have traveled through other forums and procedural pathways.

Then What Happened? The October 2025 Final Judgment

After the Fourth Circuit’s August 2025 decision, the case returned to the district court to determine a remedy. In
October 2025, the U.S. District Court for the District of Maryland entered final judgment permanently blocking Maryland
from enforcing the pass-through bancementing the practical impact of the Fourth Circuit’s ruling.

That sequence matters because appellate victories sometimes get bogged down in remedy fights. Here, the end result was a
clear “you can’t enforce this provision” outcome.

Why This Ruling Matters Beyond One Maryland Statute

1) Price transparency is not optional in a functioning market

Customers don’t love surprise charges, but they especially don’t love mystery charges. When governments restrict how
businesses disclose taxes, it doesn’t make the cost disappearit just makes accountability harder. The Fourth Circuit’s
decision reinforces a simple principle: truthful information about taxes and pricing is protected speech, not a privilege
granted by the state.

2) Political accountability is a First Amendment feature, not a bug

The opinion’s theme is older than Wi-Fi: once the government acts, the public gets to criticize. If a state can impose a
tax and also silence the most direct explanation of that tax to customers, it can blunt public feedback loops. Courts are
generally suspicious of rules that look like “policy insulation.”

3) Other states are watching (and rewriting their drafts)

Digital services and digital advertising taxes have been a recurring policy temptation for states looking at modern
revenue sources. Maryland’s experiment is therefore a test case. The Fourth Circuit’s ruling doesn’t tell states “don’t
tax.” It tells them “don’t censor,” and it signals that invoice-speech restrictions will face very serious constitutional
scrutiny.

Practical Impacts for Businesses, Advertisers, and Platforms

Invoice language and billing layouts can be less… paranoid

The most immediate business impact is on invoicing and customer communications. The Fourth Circuit protected the ability
to itemize and explain tax-driven price changes through invoices, order forms, and similar materialsespecially when the
“explanation” is truthful and non-misleading.

Contracts and “tax change” clauses deserve a second look

Many B2B advertising contracts include clauses about changes in law, taxes, or regulatory costs. Companies may revisit:

• whether tax-related charges can be listed as separate line items,
• how pricing adjustments are described (plain English helps), and
• how to document the basis for increases for audit and customer-relations purposes.

Compliance teams: what changes now vs. what’s still messy

What changes: the speech ban on certain forms of disclosure is no longer enforceable. What stays messy: the underlying
tax regime still exists, and administrative guidance and other litigation continue to shape how companies calculate and
report liability. So the compliance task shifts from “how do we talk about this?” to “how do we compute and document this
correctlyand communicate it without making it weird?”

FAQ: Quick Answers People Actually Ask

Did the Fourth Circuit strike down the entire Maryland digital ad tax?

No. The decision targeted the pass-through speech restriction. The broader tax remains on the books, and other legal
challenges to the tax’s structure have followed separate tracks.

Can companies now add a line item labeled “Maryland Digital Ad Tax”?

The ruling invalidated Maryland’s attempt to prohibit that kind of explicit disclosure via fees/surcharges/line items
tied to the tax. Businesses should still coordinate with counsel on implementation details, but the core constitutional
barrier to disclosure has been removed.

Why does the First Amendment apply to invoices?

Invoices aren’t poetry, but they are communication. When the government bans a truthful message because of its content
especially one that invites criticism of government policythat raises classic First Amendment issues.

Bonus: On-the-Ground Experiences (What This Ruling Feels Like in Real Life)

Court opinions can read like they were written by a committee of dictionaries. But the “speech ban” fight played out in
the very human world of billing templates, customer escalations, and the universal panic that follows the phrase “new
tax.”

Experience #1: The finance team that had to become amateur linguists.
For large platforms and ad-tech companies, the biggest headache wasn’t always the tax calculationit was the
communication choreography. Some teams reportedly built multiple invoice versions: one for Maryland-related digital ad
activity, one for everywhere else, and a third “just in case” version for customers likely to ask questions. When the
pass-through ban hovered over line-item disclosures, internal discussions turned into grammar debates: “Can we say
‘regulatory cost adjustment’?” “Is ‘government-imposed fee’ too spicy?” “What if we mention ‘Maryland’ but not ‘tax’?”
That kind of cautious wordplay doesn’t make customers happier; it just makes invoices less clear. The Fourth Circuit’s
decision removes a major incentive to communicate in riddles.

Experience #2: The small business advertiser stuck in the middle.
Maryland’s policy goal may have been to tax large digital advertising businesses, but price signals ripple. Picture a
mid-sized Maryland retailer buying ads through a platform. They notice costs creeping upward and ask the obvious
question: “Why?” Under a speech restriction, the most straightforward answer could be chilledespecially in the invoice
itself, where details are normally recorded. That creates a weird dynamic where the business paying the bill has to play
detective: searching press coverage, asking account reps, or guessing whether a cost increase is market-driven, seasonal,
or tax-related. A transparent line item doesn’t magically eliminate the cost, but it does eliminate a lot of suspicion.
When customers understand the “why,” disputes shift from “are you hiding something?” to “how do we plan for this?”

Experience #3: Customer support teams became the “public-facing legislature.”
When an invoice can’t easily say “this is due to a Maryland tax,” the burden often lands on customer support and account
managers. They get the calls. They absorb the frustration. They’re asked to explain a public policy outcome while also
staying inside tight compliance scripts. That’s not a great job description. And it creates inconsistency: one customer
gets a clear explanation in a call; another gets vague wording in an email; a third gets silence because no one is sure
what’s allowed. One understated win from the Fourth Circuit’s decision is operational: it encourages consistent, written,
auditable disclosures. In plain terms, it’s easier to provide one honest explanation than to maintain a maze of half-said
phrases.

Experience #4: The “invoice as a political document” reality check.
The Fourth Circuit recognized something everyone in business already knows: invoices aren’t just payment requests; they’re
mini-records of how the world works. When materials, shipping, wages, or taxes change, invoices show it. A government rule
that says “you may raise prices but you may not say why in this obvious place” doesn’t feel like consumer protectionit
feels like narrative control. After the decision, many businesses can return to a calmer default: if a public policy
changes costs, the business can say so directly, and the customer can decide whether to complain to the vendor, the state,
or both (as is their constitutional right).

Conclusion

The Fourth Circuit’s decision striking down Maryland’s digital ad tax speech ban is a reminder that the First Amendment
isn’t reserved for campaign speeches and protest signsit also protects the mundane, powerful act of telling the truth on
a bill. Maryland can debate and defend its digital ad tax on the merits. What it can’t do is muzzle companies from
identifying the tax in ways that customers naturally understand, especially when the apparent purpose is to avoid
political backlash.

In a world where digital commerce changes faster than state tax codes, this ruling draws a bright line: tax policy may be
controversial, but censorship is not an acceptable tool for managing the controversy.