When a city decides to tax streaming, the first reaction from many platforms is: you can’t really treat us like cable… can you?
In Disney Platform Distribution v. City of Santa Barbara (B342211, Dec. 17, 2025, 2d Dist., Div. 6), the Court of Appeal said yes. It upheld Santa Barbara’s 5.75% video users tax as applied to Disney+, Hulu, and ESPN+ subscriptions used in the city.
The case tees up a bigger California question: can a utility users tax written in an earlier era, but modernized by voters in 2008, reach today’s streaming platforms—and if it can, do the Internet Tax Freedom Act (ITFA), the First Amendment, or Proposition 218 block that result? The court’s answers were straightforward: the ordinance reaches streaming, and none of those defenses changed the outcome.
The Setup: Measure G and the Video Users Tax
In 2008, Santa Barbara voters adopted the Telecommunications and Video Users’ Tax Reduction and Modernization Ordinance (Ordinance 5471), commonly known as Measure G. It replaced an older utility users tax with a broader levy on “telecommunications and video services,” set at 5.75% of charges for covered services.
The tax is imposed on “every person in the City using video services,” but it is collected and remitted by the “video service supplier.” Measure G defines “video services” in expressly technology-neutral terms, including video programming delivered using internet protocol (for example, IPTV and IP-Video) “regardless of the technology used” to deliver it.
How Disney Ended Up in the Dispute
Years later, Disney Platform Distribution (Disney+), BAMTech (ESPN+), and Hulu streamed video to Santa Barbara subscribers over the internet, using customers’ independently procured ISPs and content delivery networks. After an audit, the City concluded the Disney entities had not collected or remitted the video users tax for 2018–2020 and issued deficiency determinations totaling roughly $600,000 in tax, penalties, and interest.
Disney pursued an administrative appeal (heard by retired Justice James Lambden) and lost, then sought judicial review through a petition for writ of administrative mandate. The superior court denied relief, and the Court of Appeal reviewed the core legal issues under Code of Civil Procedure section 1094.5.
The Core Holding: Streaming Falls Within “Video Services”
Disney’s main coverage argument turned on the ordinance’s “channel” language. Measure G defines a “video service supplier” as an entity that “provides or sells one or more channels of video programming” (or the capability to receive them). Disney argued “channel” should be read narrowly, as a cable-era concept tied to a dedicated transmission path, not on-demand streams delivered over the open internet.
The Court of Appeal refused to graft a technical, FCC-style definition onto a voter-enacted ordinance. Instead, it asked how voters and ordinary consumers would understand the term in context—especially given Measure G’s express inclusion of internet-protocol video and its repeated “regardless of the technology used” framing. In everyday TV talk, the court reasoned, “channels” are programming sources (ESPN, CNN, Disney Channel), not physical transmission paths. On that ordinary meaning, streaming fit within that definition.
That reading also avoided a result the court viewed as inconsistent with the measure’s modernization purpose: a resident pays city tax to watch ESPN through a cable bundle but pays nothing to watch the same content on ESPN+ over the internet, even though the ordinance was drafted to be technology-neutral. The court treated that mismatch as the kind of loophole Measure G was meant to close, not create.
ITFA: No Discriminatory Tax on Electronic Commerce
Disney also argued that even if the ordinance covered streaming, applying the tax violated ITFA because it amounted to a discriminatory tax on electronic commerce. The court disagreed. In its view, the ordinance taxes the use of video services regardless of delivery method—coaxial cable, fiber, or over-the-top streaming—so it does not impose a special surcharge on online providers.
Other Challenges Rejected: First Amendment, Prop 218, and PUC 799
The court rejected Disney’s other challenges as well. On the First Amendment, it treated the video users tax as a content-neutral revenue measure: it applies because the provider delivers video services, not because of the message, viewpoint, or subject matter of what appears on screen.
On Proposition 218 (Cal. Const., art. XIII C), Disney argued that voters in 2008 did not clearly approve taxing modern streaming services, so Santa Barbara effectively “extended or increased” the tax without a new election. The court viewed Measure G’s intentionally broad, technology-neutral language as authorization that continues to apply as video delivery evolves, not a new tax increase requiring another vote.
Finally, Disney relied on Public Utilities Code section 799, arguing the City failed to provide required notice for certain tax changes affecting communications services. The court concluded section 799 either did not apply in this setting or, even if it did, any notice issue did not defeat applying the ordinance to Disney here.
Why This Decision Matters Beyond Streaming
The takeaway is not that every digital business is automatically taxable under every local ordinance. It is that broadly worded, voter-approved utility-style taxes can migrate into modern subscription models, and courts may read those terms in a practical, consumer-facing way rather than a network-engineering way.