Newly signed legislation in Utah brings clarity to Utah’s sales taxes by including a tax on streaming services in the tax code.1 The tax will apply to streaming services starting July 1, 2026. Prior to this legislation, charges for pure streaming services were not subject to tax, but any streaming service that allowed users to view content offline were potentially subject to tax. This legislation further brings consistency to Utah’s sales and use tax law, as the state already taxes several digital products, electronically delivered software, and SaaS.2
This isn’t the first time Utah has imposed the sales tax on streaming services.3 In late 2019, a similar provision was adopted imposing the tax on streaming services effective April 1, 2020, but before the law could take effect, it was repealed due to public outcry over the tax. At least one streaming provider stopped collecting tax on their streaming product after the 2019 legislation was repealed.
However, the Tax Commission took the position that streaming providers that allowed users to download and view content offline were actually providing taxable digital products. Since most streaming providers don’t separately state charges for streaming only services versus streaming and download services, the Tax Commission held that they are providing a bundled transaction and taxed the entire charge.
A bundled transaction occurs when a taxable product or service is sold with an exempt product or service for one price. In most situations a bundled transaction is taxed on the entire price because of the presence of a taxable product or service. However, with this new legislation, the ambiguity over whether a streaming service is a bundled transaction subject to the sales tax has been removed since the tax will now be imposed directly on streaming services.
[1] SB162, page 54 – 59-12-103(1)(o)
[2] SSTP matrix pp. 12-13; SB162, page 53 – 59-12-103(1)(m)
[3] Taxpayer v. Business Taxes and Discovery Division of the Utah State Tax Commission, p. 3