Streaming Networks Disney, Hulu, and ESPN Sue City of Santa Barbara Over User Tax

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Streaming giants Disney+, ESPN+, and Hulu, have filed a lawsuit against the City of Santa Barbara stating they were unfairly charged a tax designated for cable television providers.

The companies, all owned by the Walt Disney Company, filed a lawsuit on April 24th challenging the city’s decision to apply its Utilities Users Tax (UUT) totaling $642,000 without consent from residents.

On Tuesday the Santa Barbara City Council met in a closed-door session to discuss the matter but no decisions were announced.

According to the lawsuit, the streaming services claim the city had the 5.75% UUT taxes in place for 13 years but only applied them to the companies in 2022. This sudden implementation resulted in the demand for over $450,000 in back taxes for the period from 2018 to 2020, along with an additional $150,000 in interest and penalties.

Disney claimed the UUT was originally intended for “cable television” and does not include internet streaming services as they operate differently in terms of transmission between the supplier and subscriber. When the companies requested a refund for these charges, the city-appointed hearing officer denied their appeal, which marked a notable deviation from the city’s earlier stance that the UUT did not pertain to taxing the internet.

This legal action is part of a larger trend, with streaming companies levying similar challenges against numerous cities that have imposed comparable cable TV taxes on them.

In February the companies made a total payment of $642,257 to the city while submitting a request for refund. Keith DeMartini, the Tax Administrator and Finance Director of Santa Barbara who is named as a defendant in the lawsuit, denied the request.

Lawyers for the streaming companies reviewed Santa Barbara Finance Committee meetings from 2008, when the UUT was created, to use in their arguments against the city.

The lawsuit quotes former committee members clarifying the purpose of the tax stating it only applies to cable television services and not internet streaming.

The suit also states its video content falls under First Amendment protection and imposing taxes could be seen as targeting protected speech.

The companies are seeking a full refund of the amount paid, along with interest, court fees, and a declaration that the city’s application of streaming taxes violates the U.S. Constitution.

The next court date is scheduled for August 24.

Edhat Staff

Written by Edhat Staff

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  1. There will likely be consequences, and if the city is wrong, it will screw the deficit they’re backhandedly trying to fix with what seems like a clap trap scheme. A good reason to get back to a Mayor run rather than administrator run city. Is this the tip of an iceberg? What about the other streaming services? Also how do they go years without assessing the tax then try to impose penalties? If you’re right, and reading the tea leaves, I tend to think you are, the consequence is likely to be local taxpayers getting hosed and the employees responsible given raises and promotions and more PTO. Companies like Disney think hard about this kind of stuff, they didn’t want to have to file this action.

  2. The city of SB will lose this fight. As everything these days is streamed across thousands of different service providers, YouTube, all the major networks (cnn, msnbc, cbs, pbs, etc) by not going after all of them and single handedly targeting Disney, they’ve selectively discriminated and targeted with prejudice a single provider. This will 100% be thrown out and they will lose based on that alone. You can’t go after taxation on an entire industry and selectively only bill/target a single entity. It’s an all or nothing. Again idiots running the city, stop messing it up for everyone else.

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