Disney Is Suing To Keep Cities From Taxing Its Streaming Services

in Disney, Entertainment, Movies & TV

Bob Iger and Mickaey Mouse standing in front of Magic Kingdom Park at Disney World Resort with investments falling down.

Credit: Edited by Inside The Magic

The Walt Disney Company pays millions of dollars in taxes each year worldwide. According to a study commissioned by Disney, the company paid $1.1 billion in local and state taxes in 2022 just in Central Florida.

Bob Iger speaking at a podium against a blue-lit backdrop.
Credit: Disney

However, like all corporations in America, the The Walt Disney Company tries to pay as little in taxes as possible. Now, Disney has filed a lawsuit against the city of Santa Barbara in California to avoid paying an additional tax on its streaming service.

The lawsuit stems from a law that the Santa Barbara City Council passed in 2011, allowing the city to create a Utilities User Tax (UTT). These taxes were originally just put on over-the-air cable companies that delivered services to Santa Barbara.

However, with cable dying, the Santa Barbara City Council decided to shift these taxes onto streaming services in the city. For the Walt Disney Co., this included Disney+, EPSN+, and Hulu. 

Streaming service synergy: hulu, disney+, and espn+ logos intertwined with colorful dynamic lines against a dark blue background.
Credit: Disney

The city decided to shift the burden onto streaming services in 2022 and sent Disney a tax bill for $450,000 plus an additional $150,000 in late fees and interest. In February, Disney paid the city $642,257 in taxes but immediately requested a refund.

The Santa Barbara Finance Committee and Finance Director reviewed Disney’s application for a refund but denied it. Now, Disney is suing the city.

In its lawsuit, Disney claims that its streaming service operates differently from a traditional cable provider and that a streaming service has different terms and conditions for its subscribers than cable does.

Disney claims its streaming services do not fall under the “adopted industry understanding of channels” as “end-to-end transmission.” Disney also argues that the city did not warn them about the changes to its tax laws that would affect its video service.

Mickey Mouse with the Disney+ logo
Credit: Inside the Magic

This is one of dozens of lawsuits filed by streaming services around the country as municipalities lose more money from the dwindling taxes on cable companies. The city of Santa Barbara is also facing another lawsuit from a separate streaming service.

Disney and other streaming services also claim that distributing video content is protected speech under the First Amendment and that taxing them is taxing and discriminating against protected speech.

Disney is seeking to have all of its taxes and fees returned to it and for the city to pay all of its legal costs. Should the UTT tax be allowed to stand, Disney will inevitably recoup that cost from the consumer. 

The case is being heard by Judge Donna Geck in Santa Barbara County Court and will begin in August.

Do you think Disney should sue over streaming service taxes? 

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