We filed an amicus curiae (“friend of the court”) brief on November 7 urging the U.S. Court of Appeals for the Fourth Circuit to strike down Maryland’s law preventing businesses from listing the state’s new Digital Ad Tax customer invoices. This “tax speech” ban infringes on key First Amendment rights.
At issue in Chamber of Commerce of the United States v. Lierman is Md. Code, Tax-Gen. § 7.5-102(c), which prohibits sellers of digital services from itemizing on their invoices any “separate fee, surcharge, or line-item” that details the effect of Maryland’s higher tax structure. All agree that businesses are free to raise their prices to cover extra Maryland tax, but the businesses are barred from detailing on the invoices why the prices are higher as an itemized line.
Discussion of tax issues—particularly tax hikes—forms a core part of American political history. Tax speech is quintessentially political speech, tracing back to the colonial era’s resistance to “taxation without representation,” a phrase dating back to the 1750s and repeated by the Founders throughout the lead up to the American Revolution. Having secured Independence, the Founders put into place multiple provisions in the proposed Constitution to prevent states from exceeding their taxing and regulatory powers over interstate goods and services. That is how we know the First Amendment was originally thought to cover tax related speech. And, of course, talking about taxes is still important today, as anyone knows reading NTU’s Ballot Guide for this election year, for example.
Maryland’s attempt to ban this speech strikes at the very heart of the First Amendment’s protections. Therefore, the highest standard of judicial review should apply in this case. Strict scrutiny applies to bans on political speech and content-based restrictions on speech. Maryland has not shown that § 7.5-102(c) is created for a compelling governmental interest, nor has it shown the law is properly tailored to that interest. Our brief details the important First Amendment precedents on these issues, especially First National Bank of Boston v. Bellotti, a 1978 case where the United States Supreme Court stopped Massachusetts from banning corporate statements about tax increases.
But even a slightly lower standard of judicial review of commercial speech would still find Maryland’s law unconstitutional. Maryland still needs to prove that its speech ban supports a substantial governmental interest and is properly tailored to that interest. Maryland failed to do so here, because bans are strong medicine, especially when they limit the truthful telling of government activity. At best, it appears that Maryland fears the public will react harshly to the new taxes, but that is hardly an interest justifying censorship.
In this instance, the best and most compelling method to communicate with consumers is to state the exact amount they pay extra due to Maryland’s law. Invoices are one-on-one communications that explain the surcharges due under Maryland law in the quickest, most effective way to show the link between higher taxes and higher prices. But that option is illegal under Md. Code, Tax-Gen. § 7.5-102(c).
This is an important case intersecting between tax policy and the right to speak about government activity. Buyers of digital services subject to Maryland’s tax should be aware that the state is making their purchase costlier. We will continue to monitor the case’s developments.
The case is Chamber of Commerce of the United States et al. v. Lierman (4th Cir. No. 24-1727).