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.
Los Altos Vice Mayor Larry Lang said he first learned about the streaming tax opportunity at the League of California Cities annual conference, held September 23 to 25, 2026 in Anaheim, according to the Daily Post. Lang said Santa Barbara has opened the way for other cities to pursue the same kind of tax, and said he has since spoken with City Manager Gabriel Engeland about the idea, the paper reports. Los Altos already imposes a 3.2% tax on cable TV bills, giving the city an existing utility tax framework that officials are now looking to extend to streaming subscriptions, per the Daily Post.
A Playbook Spreading Among California Cities
Materials presented at that same League of California Cities conference framed the Santa Barbara ruling as a playbook for municipal finance, specifically advising city leaders that existing cable utility taxes represent an untapped source of revenue, according to the League of California Cities. More than 150 California cities and four counties already impose a utility user tax, with voter-approved rates ranging from 1% to 11% that supply an average of 15% of general fund revenues for the cities that have adopted them, according to a city finance primer cited by the City of Rocklin. Within Santa Clara County, San Jose has a utility-tax ordinance.
Comparable local ordinances may be evaluated to determine whether existing taxes cover streaming. Chicago's Amusement Tax is 10.25% for electronically delivered amusements.
For now, Los Altos' exploration of a streaming tax remains in early discussion, with Lang and Engeland having only begun conversations about whether to pursue it, per the Daily Post. Whether the city moves forward, and how quickly, remains to be seen.
