A Maryland court’s decision striking down the state’s digital advertising tax has reinforced a key warning the PA Chamber made throughout the debate over a similar proposal in Pennsylvania earlier this year.

The Maryland Tax Court ruled on Friday that the tax violates the federal Internet Tax Freedom Act and ordered Maryland to refund taxes collected, plus interest. The law had already faced legal challenges, including a federal appeals court ruling last year that struck down part of it on First Amendment grounds.

The latest ruling has direct implications for the debate over House Bill 1678 in Pennsylvania, which the PA Chamber led the opposition against this year. The bill passed the House of Representatives in June by a vote of 139-63 but was not included in the final state budget.

House Bill 1678 would have applied the state’s 5 percent gross receipts tax to digital advertising purchased in Pennsylvania. As lawmakers considered the proposal, the PA Chamber warned that the proposal likely violated the Internet Tax Freedom Act, which prohibits discriminatory taxes on electronic commerce. House Bill 1678 singled out digital advertising while exempting traditional forms of advertising, including newspapers, television, radio, and billboards.

The PA Chamber also cautioned lawmakers that the tax would place costs on Pennsylvania consumers and small businesses that rely on digital advertising to reach customers.

Additionally, digital advertising revenue is already subject to Pennsylvania’s Corporate Net Income Tax under the state’s market-sourcing rules, meaning H.B. 1678 would have imposed a duplicative tax on the same economic activity.

With Maryland now facing a court-ordered refund of taxes collected under its digital advertising tax, the court’s ruling offers a timely example of the legal and financial risks the PA Chamber warned Pennsylvania policymakers about as it successfully lobbied to keep the proposal out of this year’s budget agreement.