(The Center Square) – A court ruling in Maryland may have implications for a trio of new taxes in Illinois.
Maryland’s tax court found last week that the state’s digital advertising gross revenues tax violates the Tax Freedom Act, the Commerce Clause and the Due Process Clause.
Andrew Wilford, director of state policy for the National Taxpayers Union Foundation said Illinois’ 10% targeted advertising services tax has one of the same fatal flaws.
Wilford said federal law does not allow discrimination against digital products.
“For example, you can’t tax digital advertising and not tax traditional advertising. Unfortunately, that is what Illinois does, so this very much suggests that Illinois’ tax could very well be coming off the books,” Wilford told The Center Square.
Jared Walczak, senior fellow at the Tax Foundation, said the Maryland ruling was five and a half years in the making.
“A Maryland court has no jurisdiction over Illinois, but an Illinois court looking at this, or eventually a federal court looking at this, would be looking at the exact same statutes, the exact same case law, the same constitutional provisions, and would likely come to the same conclusions,” Walczak told The Center Square.
Illinois’ tax is scheduled to take effect on January 1, 2027 after it was included in the state revenue package signed by Gov. J.B. Pritzker in June.
On Aug. 5, State Rep. Travis Weaver, R-Peoria, filed House Bill 5807 to repeal the tax.
Statehouse Republicans have also filed bills to repeal the 0.2% digital assets tax and the governor’s social media platform fee.
Walczak said a state or federal court would hear the same arguments the Maryland court did and likely reach the same conclusions with Illinois’ digital ad tax and social media fee.
“If anything, some of them are even stronger with Illinois’ social media tax because of how poorly drafted it is, how broad it is, whether intentionally or accidentally,” Walczak told The Center Square.
Illinois’ digital assets tax is already facing a legal challenge in Sangamon County court.
The Digital Chamber filed a complaint last month against Illinois Department of Revenue Director David Harris and Attorney General Kwame Raoul, claiming the tax violates both the U.S. and state constitutions.
Bellementis law firm partner Olta Andoni said there are also due process implications with Illinois’s digital asset tax.
“So the tax is void for vagueness and has very undefined terms, includes a felony as well, and rests on an unconstitutional presumption,” Andoni told The Center Square.
In June, Kalshi filed suit against the new Illinois tax on prediction markets.
The Illinois revenue package also includes a new tax on sports wagering.
Sean Reed contributed to this story
