The Maryland Comptroller has released updated guidance on the Digital Advertising Gross Receipts (DAGR) tax, including changes that will go into effect January 1, 2026. The DAGR tax is imposed on a taxpayer that has annual gross revenues of over $1,000,000 derived from digital advertising services in Maryland. Taxpayers who meet this requirement must file quarterly estimated tax returns and pay at least 25% of the expected tax on April 15, June15, September 15, and December 15, as well as an annual return, which is due April 15 of the following year. With the annual return, any remaining payment must be submitted unless all tax due was paid with the quarterly returns. The due dates are based on the calendar year and do not change, regardless of the taxpayer’s fiscal periods for income tax purposes. Liability for the DAGR must also be determined based on calendar year, and the taxpayer’s rate is based on global annual revenue. There are four tax rates based on global revenue. Unlike sales tax, which is imposed on the purchaser, the DAGR is imposed on the provider of digital advertising services and cannot be directly passed on to customers in the form of a separate fee, surcharge, or line item. The entire purchase price of the digital advertising services is subject to the DAGR, including any increases to account for or recover the DAGR tax. Since the assessable base is based on an apportionment fraction which puts the count of devices accessing the digital advertising services in Maryland over the number of devices which have accessed the services worldwide, taxpayers who are subject to the DAGR tax will need to ensure they are keeping appropriate records of digital advertising services provided in Maryland and the basis for calculating tax owed.
Beginning January 1, 2026, taxpayers who are subject to DAGR tax must submit applications for revisions of an assessment and/or claims for refunds to the Comptroller prior to filing an appeal in the Maryland Tax Court. This includes any assessments of the DAGR tax made after December 31, 2025, even for periods prior to 2026. The Maryland legislature also amended § 13-509 to allow the Comptroller to correct an erroneous assessment, even if the taxpayer has not submitted a timely application for revision or refund claim. Taxpayers seeing a refund for overpaid DAGR tax may file an amended return using Form 600 and by checking the “amended return” box. Maryland requires amended returns to be submitted with an explanation of the reason for filing, documentation to explain the changes, and any records or technical information which forms the basis for the refund request. All claims for DAGR refunds must be filed within three years of paying the tax.
One additional item of note on the tax bulletin is that after December 31, 2026, the department will require all returns to be filed electronically.
Taxpayers who are subject to this tax will find recordkeeping particularly important. The DAGR tax has many points of calculation for taxpayers which will need to be logged and recorded in case of an audit by the state. These records include information on how the apportionment was made, points of use both inside and outside of Maryland, and the quarterly filings and payments. After January 1, 2026, taxpayers will also need to begin their appeal process with the Comptroller, rather than proceeding to Tax Court, especially since Maryland does impose a three-year limit on refund claims. (Maryland Technical Bulletin No. 59 : Digital Advertising Gross Revenues Tax, effective July 11, 2025, published by Comptroller of Maryland)