Maryland’s experience offers a clear warning. On August 15, 2025, the U.S. Court of Appeals for the Fourth Circuit unanimously held that Maryland’s “pass-through provision” in its Digital Advertising Gross Revenues Tax violated the First Amendment. The law barred companies from itemizing the tax as a separate line on invoices. Judge Julius N. Richardson wrote: “As much today as 250 years ago, criticizing the government—for taxes or anything else—is important discourse in a democratic society. The First Amendment forbids Maryland to suppress it.” While the court did not strike down Maryland’s underlying digital ad tax, it invalidated the speech restriction and sent the case back for remedy—while other legal challenges to the tax itself continue.
Nebraska should not go down this road. Taxing advertising—digital or traditional—risks constitutional problems, hurts small businesses, and undermines local media and economic growth.
Why Nebraska should reject an advertising tax:
- It targets speech. Advertising is commercial speech. Courts have repeatedly invalidated taxes and schemes that single out speakers or content (see Grosjean, Minneapolis Star, Arkansas Writers’ Project). Maryland’s loss highlights how easily ad-related measures can cross First Amendment lines.
- It increases prices for Nebraskans. Ad taxes raise the cost of acquiring customers. Businesses pass costs through—sometimes in higher prices, sometimes in fewer promotions—hurting consumers, especially in rural and small communities.
- It harms small businesses and local media. Small advertisers rely on affordable reach; local broadcasters, newspapers, and digital publishers rely on ad revenue. An ad tax shrinks both sides of the market, reducing sales and local journalism jobs.
- It’s complex and litigation prone. Maryland’s approach triggered years of lawsuits—including claims under the Internet Tax Freedom Act and the Commerce Clause—creating uncertainty for taxpayers and governments alike. Nebraska should avoid a policy that invites immediate court challenges and compliance turmoil.
What this means for Nebraska policy:
- Don’t restrict how businesses communicate prices. Maryland’s “gag rule” fell because it controlled how companies could talk about tax costs. Any Nebraska proposal that limits itemization, fee disclosures, or tax-related communications risks the same fate.
- Avoid sector-specific or speaker-specific taxes. General, content-neutral tax policy is more defensible than targeting advertising or subsets of speakers (e.g., digital-only). Singling out advertising is a red flag under First Amendment doctrine and state free-speech protections.
- Protect Nebraska’s competitiveness. An ad tax would disadvantage Nebraska startups, independent retailers, and agribusinesses competing online, while making our state less attractive for marketing, media, and tech investment.
AAF Nebraska’s Legislative committee continues to follow ad tax proposals in Nebraska and other states. We oppose any legislation that taxes advertising in any form—digital or traditional—and any measure that limits how Nebraskans may communicate tax-related costs to their customers.
