Summary
The California Court of Appeals upheld a local ordinance taxing video services as applying to video streaming services.
A municipal voter-approved tax on video services was upheld to apply to video streaming revenues. The decision, California Court of Appeal’s decision Disney Platform Distribution, Inc. v. City of Santa Barbara, 2d Dist., Div. 6, No. B342211 (Jan. 30, 2026), is a significant win for California cities. The decision may also serve as persuasive authority guiding courts and administrative bodies grappling with whether video programming delivered via streaming over a cable system by a cable operator is a cable service.
Background on the Santa Barbara Ordinance
Santa Barbara voters passed Measure G in 2008, enacted as Ordinance No. 5471, known as the “Telecommunications and Video Users’ Tax Reduction and Modernization Ordinance.” The ordinance levies a 5.75% tax on video services usage within the city, with suppliers collecting it from users. “Video services” are defined expansively to cover video programming and associated services. They comprise services using one or more channels. These are provided by a ‘video service supplier.’ This applies regardless of the technology used to deliver, store or provide such services. It includes references to internet protocol technologies like IPTV and IP-Video. Ballot materials emphasized a technology-neutral intent. They applied the tax to all subscription video services. Meanwhile, the telecommunications tax rate was lowered overall.
Challenge to the Ordinance
The appellants—Disney Platform Distribution, Inc., BAMTech, LLC, and Hulu, LLC—offer subscription video streaming services, providing live and on-demand content over the internet. Access occurs through apps or websites, with users depending on their internet service providers for delivery.
In 2022, the City’s Tax Administrator issued assessments for taxes, penalties, and interest covering a specific period. The assessments were about $506,117 for Hulu, $37,270 for BAMTech, and $68,950 for Disney Platform Distribution. The appellants argued their services were outside the ordinance’s scope. They cited that internet streaming lacks “channels” in the technical sense of dedicated transmission paths.
Following the assessments, the appellants appealed to the City Administrator, who appointed an independent hearing officer. The hearing officer affirmed the Tax Administrator’s ruling. The appellants then sought a writ of administrative mandate. They pursued this in Santa Barbara County Superior Court under Code of Civil Procedure section 1094.5, which was denied. The California Court of Appeal, Second Appellate District, Division Six, affirmed the judgment in a published opinion.
The court examined the appellants’ challenges, focusing on ordinance interpretation and legal claims.
Ordinance Applies to Streaming
The ordinance was held to cover video streaming services. The court adopted an ordinary meaning of “channel” as a programming source (e.g., a network like ESPN), not a technical transmission path. This aligned with the ordinance’s language and voter intent for technology neutrality, accommodating new delivery methods. The court dismissed reliance on federal Cable Act definitions (47 U.S.C. §§ 522), noting they predate streaming and do not match the ordinance’s goals. Delayed enforcement by the City from 2008 to 2022 was deemed irrelevant to the tax’s scope.
Compliance with the Internet Tax Freedom Act (ITFA)
The tax complied with the ITFA (47 U.S.C. § 151 note), which bars discriminatory electronic commerce taxes. Streaming subscriptions differ from DVD sales or rentals, involving service fees rather than tangible goods taxed separately, thus avoiding discrimination.
No First Amendment Claim
The tax was ruled content-neutral. It applies evenly to video services without targeting content, messages, or viewpoints. Thus, it does not violate the First Amendment.
No Additional Voter Approval Required
Enforcement did not require new voter approval under Article XIII C (Proposition 218). It neither increased the tax nor changed its methodology. Streaming services were within the original scope.
No Additional Notice Required Under Public Utilities Code Section 799
No prior notice was needed under Public Utilities Code section 799. The City applied an existing ordinance. There was no enactment of a new tax or alteration of the base or collection.
Implications for Local Governments
This ruling is a win for California cities. It affirms their ability to apply technology-neutral ordinances to streaming services. This helps preserve revenue amid cord-cutting trends. Amicus briefs from organizations like the League of California Cities underscored potential revenue losses without such enforcement.
The decision may also hold persuasive authority in related contexts. This could include cases determining if video programming streamed over a cable system by a cable operator qualifies as “video programming” or “other programming” and ultimately a “cable service” under the federal Cable Act. Similarly, under California’s Digital Infrastructure and Video Competition Act (DIVCA, Pub. Util. Code §§ 5800 et seq.), which broadly defines “video service” in a similar technology-neutral manner (§ 5830(s)), the court’s emphasis on ordinary meanings and intent to close loopholes could inform arguments for inclusion. However, outcomes would depend on specific statutory language and facts.
Local governments with comparable ordinances may evaluate their enforcement strategies. Consulting counsel is advised for jurisdiction-specific applications.
Bradley Werner, LLC
Michael Bradley and Nancy Werner are nationally recognized and respected local government attorneys. Our firm is dedicated to representing local governments on broadband, cable, telecommunications, utilities, and right-of-way management issues. We have decades of experience representing municipalities on communications and utilities matters.