Los Altos could become the next California city to slap a tax on your Netflix or Hulu bill. City leaders say they are exploring a streaming tax similar to one Santa Barbara has already defended in court, after Disney tried and failed to kill it.
The idea surfaced after a legal fight in Santa Barbara, where the city folded streaming video into its existing utility tax, according to Palo Alto Daily Post. Santa Barbara’s utility tax sits at 5.75% and already covers cable TV, and the city applied that same rate to streaming subscriptions as part of the levy, per the Daily Post. Disney sued over the move, but the California Court of Appeal upheld the streaming tax on January 30, 2026, and tossed out Disney’s challenge, the newspaper reports.
That appellate ruling became final after the California Supreme Court denied Disney’s petition for review on April 22, 2026, according to HdL Companies. The court found that the federal Internet Tax Freedom Act does not shield streaming subscriptions from local taxation, since digital subscriptions count as non-tangible services rather than products similar to DVD rentals, per the appellate decision detailed by Justia Law. The same ruling held that applying Santa Barbara’s existing, voter-approved video utility tax to streaming did not violate Proposition 218, since enforcing the ordinance’s broad original intent did not amount to creating a new tax or raising a rate, Justia Law notes.
How Santa Barbara’s Tax Already Reached Streaming
Santa Barbara voters actually approved the underlying ordinance back in 2008, passing Measure G as a technology-neutral telecommunications and video users’ tax that explicitly covered video delivered over the internet, according to Bradley Werner LLC. That ordinance reduced the city’s overall telecommunications tax rate to 5.75% while broadening its definitions to anticipate services that didn’t widely exist yet at the time of the vote, the firm’s analysis states. When the city later audited major media companies, it recovered $506,117 in back taxes, penalties, and interest from Hulu, $68,950 from Disney Platform Distribution, and $37,270 from BAMTech, covering the period from 2018 through 2020, per HdL Companies…