Utah’s new attempt to make Big Tech pay for programs aimed at helping children is headed to court before the state can collect a dime. The Utah Taxpayers Association is asking a judge to block a 4.7% levy that lawmakers designed for major targeted-advertising companies, but critics say could boomerang onto local businesses and consumers.
As reported by FOX 13 News Utah, the association alleges the tax violates federal law and seeks an injunction before it takes effect in 2027. The lawsuit also opens an unusual fight between a longtime Utah tax watchdog and the Republican-led Legislature that approved the measure.
What Utah’s Targeted Advertising Tax Would Do
Senate Bill 287, sponsored by Sen. Mike McKell, R-Spanish Fork, creates an annual tax on companies that deliver targeted advertising to Utah audiences. The Utah Legislature’s enrolled bill defines targeted advertising through features such as ad auctions, individualized data profiles and interactive ads that let users click for information or make a purchase.
The law applies only to entities meeting several thresholds: at least $1 million in targeted-advertising receipts tied to Utah, at least $100 million in worldwide targeted-advertising receipts, and targeted advertising accounting for at least half of the company’s total revenue. The tax begins January 1, 2027, and is calculated using the company’s worldwide targeted-advertising receipts and the share of its impressions delivered to Utah users.
The Money Is Meant For Youth Programs
Lawmakers pitched the measure as a way to make companies that profit from user data help pay for programs addressing the effects of targeted advertising. The bill creates a restricted account that can support child literacy, youth sports, children’s mental-health services, foster care and adoption programs, and public education campaigns.
A fiscal analysis from the Utah Office of Legislative Fiscal Analyst estimates the tax could generate about $15.2 million in fiscal year 2028 and $21.3 million in fiscal year 2029. The same analysis says certain companies delivering targeted ads in Utah would carry the added tax liability, while the State Tax Commission would need new resources to administer the program.
The Legal Fight Could Turn On Who Really Pays
The Utah Taxpayers Association argues that the measure runs afoul of the Internet Tax Freedom Act, a federal law that bars multiple or discriminatory taxes on electronic commerce. A Congressional Research Service summary says the federal law generally requires electronic commerce and comparable offline transactions to face the same tax treatment, an issue likely to sit at the center of the case.
The association also warns that the legal taxpayer may not be the only party feeling the hit. Billy Hesterman, the group’s president, told FOX 13 News Utah that companies indicated during the legislative session they could pass the cost along to Utah customers, including businesses that buy online advertising.
McKell disputes that scenario and says the law is aimed at large technology companies rather than small Utah businesses. He has also questioned how the association is financing the lawsuit, while Hesterman declined to identify donors and said the group’s membership includes technology companies, utilities and individual taxpayers.
Tax Fight Is Only Starting
The lawsuit seeks to stop the tax before the first payment is due, so the State Tax Commission’s rulemaking and collection work could be affected by the court’s decision. For now, Utah has a law on the books, a projected stream of youth-program funding and a constitutional and federal-law fight waiting in the wings.
