Startup News Digest 08/21/26
The Big Story: Court strikes down Maryland digital ad tax
Startups could see relief from a tax that raises the cost of digital services they rely on to reach customers and grow. Late last week, a Maryland court struck down the state’s digital advertising tax—which has raised hundreds of millions of dollars for the state since coming into effect in 2022—finding that it unlawfully discriminates against online advertising and violates the Constitution and the Internet Tax Freedom Act. Although these taxes primarily target large, global tech companies, the cost of the ad tax can ultimately be passed down to their customers, including individual consumers and startups that depend on digital services.
In deciding on the challenges to the law, brought by Peacock, Google, and Apple, the Maryland Tax Court said Maryland’s state tax on digital advertising violates the Constitution’s due process and commerce clauses as well as violating the Internet Tax Freedom Act, a federal law that prohibits taxing online and offline versions of the same service differently. The court ruled that the state must issue refunds for the taxes it collected from the three tech companies that challenged the law. While the state of Maryland is likely to appeal, last week’s decisions will inform the future of other states’ digital advertising taxes, including the recently passed Illinois tax and ongoing legal challenges to taxes in Washington and Utah. The rulings should also discourage state policymakers from pursuing new taxes for widely used digital services.
Startups often rely on digital advertising facilitated by larger companies to reach new customers. The Maryland law applies a 2.5 to 10 percent tax on gross revenue from digital advertising earned by companies with more than $100 million in annual global revenue. While it initially included a prohibition on passing those costs down to customers, the state agreed during an earlier litigation to allow large companies to pass on the cost to customers, including startups. Higher costs for digital services, including advertising, disproportionately impact startups operating with limited resources, forcing them to divert limited resources away from hiring, product development, marketing, and other core business activities.
Policy Roundup:
Groups challenge new limits on student visas. A coalition of unions and advocacy groups sued to block a new Department of Homeland Security rule, effective September 15, that would limit F and J visa stays to no more than four years, requiring some international students and exchange visitors to apply for extensions to remain in the U.S. The rule could add another barrier for foreign-born students and researchers who feed into the U.S. high-skilled talent pipeline, making it harder for startups to access and retain the workers they need.
Trump pauses new Canada tariffs. President Donald Trump on Tuesday night delayed 50 percent tariffs on certain Canadian goods just hours before they were set to take effect after the two countries reached a preliminary deal. The pause is set to run through August 21, avoiding the immediate impact of the new tariffs. The Office of the U.S. Trade Representative indicated that the deal will include “digital trade alignment,” but scant public details and the short extension leave businesses with continued uncertainty as the two countries work toward a final agreement.
New broadband report overlooks affordability gaps. The Federal Communications Commission (FCC) approved its 2026 Section 706 Report, which concluded that high-speed Internet is being deployed to Americans at a reasonable and timely pace. FCC Commissioner Anna Gomez concurred with the report but objected to its methodology, arguing that broadband availability should account for not only infrastructure deployment but also affordability and usability. Infrastructure has limited value if consumers cannot afford or reliably use the service. The report indicates that 10.5 million people, particularly in rural areas, still lack access to fixed terrestrial broadband at 100/20 Mbps speeds. The remaining connectivity gap, along with concerns about affordability and service quality, could limit reliable broadband access for both startups and their customers.
French court blocks social media age ban. France’s Constitutional Council blocked the country’s planned social media ban for children under 15, finding that the measure infringes on young users’ expression and communication rights. The ruling halts the law for now, though the French government has said it plans to pursue a revised version. While policymakers are rightfully focused on protecting young users online, broad age restrictions can still create higher compliance costs for startups and risks to users’ privacy, cybersecurity, and expression online.
Startup Roundup:
#StartupsEverywhere: Jacksonville, Florida. After pioneering commercial in-space manufacturing and leading the team that designed the cameras for the Artemis II mission, Andrew Rush set out to solve the need for magnitudes more power for satellites in low Earth orbit. Star Catcher is building a power grid in space, concentrating energy from the sun and beaming optical and near-infrared beams of light that can greatly increase the energy output of solar panels on existing satellites. We sat down with Andrew to talk about Star Catcher, the importance of patenting technology, the evolution of capital formation in the space sector, and more.