As viewing habits shift from cable and broadband to streaming services, local governments are reviewing whether existing Utility Users Tax codes are applicable and keeping pace with new developments.
Streaming services have changed how residents consume entertainment content. They are also impacting local governments’ tax revenue and related UUT administration as cable and broadcast revenue has been declining for several years.
The recent California Court of Appeals decision involving the City of Santa Barbara is an important reminder that UUT programs should not be treated as static revenue sources. As technology changes, local jurisdictions need to determine whether their ordinances, filing procedures, compliance reviews, and revenue monitoring practices still align with today’s service models and tax equality.
In Disney Platform Distribution, Inc. v. City of Santa Barbara, the California Court of Appeals affirmed the City's application of its voter-approved Telecommunications and Video Users’ Tax to streaming services such as Disney Platform Distribution, BAMTech, and Hulu. The opinion on the rehearing was filed January 30, 2026. The California Supreme Court denied review of the case on April 22, 2026.
What Happened in Santa Barbara?
Santa Barbara adopted Ordinance 5471 in 2008. The ordinance modernized the City’s telecommunications and video users' tax, broadly defining “video services” to include those delivered by Internet Protocol. After an extensive audit effort, the City’s Tax Administrator determined that certain streaming providers had failed to collect and remit video users’ taxes for the period of January 1, 2018 through December 31, 2020, making them liable for the uncollected tax as well as applicable penalties and interest.
The court opinion lists unpaid tax, penalties, and interest of $506,117 for Hulu, $37,270 for BAMTech, and $68,950 for Disney Platform Distribution. Local reporting described the broader dispute as involving more than $640,000 paid under protest.
The streaming providers challenged the City’s position, arguing that the tax was intended for cable television, not internet streaming. The Court of Appeal disagreed and held that Santa Barbara’s ordinance was written in technology-neutral terms and applied to streaming services because the ordinance covered video services regardless of delivery method. The court also rejected arguments under the First Amendment, the Internet Tax Freedom Act, Proposition 218, and CPUC Section 799 related notice requirements.
Why This Matters for Local Government
The court decision illustrates why ordinance language matters as UUT authority depends on each jurisdiction’s Municipal Code, underlying voter approvals, definitions, administrative hearing procedures, and applicable state and federal law. Santa Barbara’s case was successful in part because the ordinance was built to create equality amongst taxpayers with language both broad enough, and technology-neutral enough, to apply to streaming services under video services and programming. This is critical news for any local government agency evaluating their applicable UUT against new technologies.
UUT Is Valuable, but Often Not Maximized
UUT is an important General Fund revenue source. It supports essential services, improves budget flexibility, and helps agencies capture revenue tied to services already being consumed within the community.
Yet UUT is often under-managed.
Even when revenue is collected from all service providers, filing practices may vary by provider. Ordinance definitions may not have been reviewed in years. New technologies may emerge faster than internal processes can adapt. Staff may lack the time or specialized expertise to monitor industry changes, scrutinize filings, identify discrepancies, or evaluate whether providers are reporting consistently and in accordance with the Municipal Code.
That creates risk and results in missed revenue.
For finance leaders and administrators, the practical question is whether or not the program is being actively administered, monitored, documented, reviewed, and enforced.
What Local Government Agencies Should Consider Now
The Santa Barbara decision is a timely prompt for local agencies to evaluate their own UUT programs.
Key review areas include:
- Ordinance language. Does the ordinance reflect current services, delivery methods, and provider models?
- Filing procedures. Are providers reporting at a timely cadence and accurately?
- Revenue trends. Are increases in the large industry segments masking downturns in the telecommunication and broadcast segments?
- Compliance processes. Are discrepancies reviewed and resolved through a documented process and is the Municipal Code enforced?
- Administrative capacity. Does staff have the time and expertise to monitor legislative, legal, and industry developments?
- Public transparency. Can leadership clearly explain how the program is administered and why gains or losses in the revenue source occur?
A Better Path Forward
Local government leaders do not need to wait for revenue loss to become visible in the budget. They can take a proactive approach to UUT administration.
A strong UUT program starts with ordinance and filing procedure review. It continues with compliance analysis, audit support, provider education, reporting, and ongoing legislative and industry monitoring.
HdL helps local governments manage the varied complexities of UUT administration, including provider registration, return monitoring, online filing and payment support, revenue forecasts, data analytics, audit and compliance reviews. The kind of support that helps cities and counties move from passive revenue collection to active revenue management.
The Takeaway
Santa Barbara’s win is a reminder that local revenue programs must keep pace with the economy they serve. Streaming services are one example. More will inevitably follow.
For local government agencies with UUT authority, now is the time to review ordinance language, confirm filing practices, analyze provider compliance, and evaluate whether revenue programs are maximizing what they were designed to capture.
UUT remains an important but often undermanaged revenue source. With the right review process and administration support, local governments can maximize revenue, improve fairness, and strengthen funding for the services residents rely on every day.
Is your UUT program keeping pace with today’s service models?
HdL can help your agency review ordinance language, filing procedures, provider compliance, revenue trends, and administration practices. Contact HdL to evaluate your opportunities to strengthen UUT revenue management.
