Utah just became the second state in the country to tax digital advertising.
On March 25, 2026, Utah Governor Spencer Cox signed Senate Bill 287, establishing an annual targeted advertising tax at a rate equal to Utah's general state sales tax rate, currently 4.85%. The legislation imposes the tax on certain large advertising businesses based on gross receipts attributable to targeted advertising delivered to Utah users. The tax is effective for tax years beginning on or after January 1, 2027. TaxHero
Maryland was first — in 2021. Utah is second. And several states are watching closely, ready to be third.
But Utah's law has a legal problem that may prevent it from surviving long enough to generate a single dollar in revenue. The same legal battle that has consumed Maryland for five years is about to start in Utah.
Here's what the law does, who it affects, what businesses need to do, and why this story isn't over.
Utah deliberately avoided using the phrase "digital advertising" — and that choice was calculated.
Senate Bill 287 creates a new tax on "targeted advertising entities" that deliver paid advertisements to individuals or audiences in Utah using data-driven targeting methods. "Targeted advertising" includes: a business entity selling advertising space to an advertiser through a bidding process; the business entity obtains or develops individualized data profiles used to deliver the advertisement; and the recipient of the advertisement can interact with the advertisement — through a link or QR code — to access information.
In plain terms: programmatic advertising, social media advertising, search engine advertising, and any ad placement that uses individual user data to target specific audiences and allows users to click through to content. The definition is deliberately broad — and deliberately avoids the word "digital" — for legal reasons that will become clear shortly.
This is the most important distinction that most coverage of Utah's targeted advertising tax misses entirely.
SB 287 imposes the annual tax on businesses that qualify as "targeted advertising entities," defined as businesses that: deliver targeted advertising to an audience or individual located in Utah; generate gross receipts of $1 million or more from targeted advertising in Utah and $100 million or more from all targeted advertising regardless of location; and whose gross receipts for the taxable year derived from all targeted advertising constitute 50% or more of the company's total gross receipts for the year. Savant Labs
All three conditions must be met simultaneously. Let's work through what that means:
Condition 1: $1 million in Utah targeted ad revenue. You need to generate at least $1 million in gross receipts from targeted advertising delivered to Utah users specifically. For most businesses advertising in Utah, you're on the buying side — not the selling side. This threshold applies to the platforms selling ad space, not the businesses buying it.
Condition 2: $100 million in total targeted advertising revenue. Your total targeted advertising revenue — across all jurisdictions — must be at least $100 million. This effectively limits the tax to major advertising platforms. A mid-sized digital agency doesn't come close to this threshold.
Condition 3: 50% of total gross receipts from targeted advertising. More than half your company's total revenue must come from targeted advertising. This condition is the most restrictive — it's specifically designed to target pure-play advertising platforms like Meta, Google, and similar companies, not diversified tech companies where advertising is one revenue stream among many.
The tax rate is currently set at 4.85% of applicable gross receipts.
In practice, the three-part threshold means Utah's targeted advertising tax directly affects a very small number of companies — primarily Meta, Google/Alphabet, and similar pure-play digital advertising platforms with significant Utah revenue. Amazon's advertising business may qualify depending on how advertising revenue is calculated relative to its total e-commerce and cloud revenue. Most other businesses — including digital marketing agencies, SaaS companies, and even mid-sized advertising networks — won't hit all three thresholds.
Even though most businesses don't qualify as "targeted advertising entities," the tax has a direct impact on businesses that advertise on platforms that do qualify.
The bill also allows the State Tax Commission to administer the tax. The tax revenue would be deposited into a restricted account made for the targeted advertising tax.
But here's the practical reality: while large digital platforms would collect and remit the tax, much of the burden would fall on businesses paying to advertise in Utah — many of which are Utah-based. Just like the sales tax is collected by retailers but ultimately borne by consumers, much of the burden of this tax on advertising in the state would be shouldered by Utah businesses using these platforms to advertise to their local customer base. Quizlet
Meta and Google don't absorb a new 4.85% tax on their Utah revenue. They pass it through in the form of higher advertising costs. Utah small businesses running Facebook ads, Google search campaigns, and Instagram promotions to reach Utah customers will see their advertising costs increase — not Meta's profit margins.
Sen. Dan McCay said he is concerned that this bill may create a tariff that will be passed on to Utah's small business owners when they want to advertise. Deb Peters, a former state senator from South Dakota, warned: "It's Utah's small businesses, retailers, restaurateurs, real estate agencies, legal practices, accounting practices, just to name a few, who would feel the biggest impact."
If you run ads targeting Utah customers and your ad platform qualifies under SB 287, your effective ad cost in Utah is going up in 2027. Plan accordingly.
SB 287 wasn't the only digital tax bill Utah passed this session. It's worth knowing about the second one — Senate Bill 162 — because it affects a much broader range of businesses.
Senate Bill 162 clarifies that Utah sales and use tax applies to a broad range of digital content and services by expressly imposing tax on amounts paid or charged for access to digital audio-visual works, digital audio works, digital books, and gaming services. This includes both streaming and subscription-based access services and applies regardless of how the content is delivered and whether a customer purchases single-use access such as a one-time rental or pay-per-view event, or access through a subscription model.
Storage, use, or other consumption of prewritten computer software are taxable whether the software is delivered electronically, by "load and leave," or accessed as seller-hosted prewritten computer software such as software-as-a-service.
This isn't new — Utah has been taxing SaaS and digital content for years. But SB 162 makes the rules explicit and removes any remaining ambiguity about whether streaming subscriptions, digital downloads, and cloud software are taxable in Utah. They are. If you've been treating any of these categories as exempt in Utah, review that classification immediately.
Here's where the story gets complicated — and why businesses should monitor this carefully before building significant compliance infrastructure around SB 287.
Utah's solution to avoid Maryland's legal problems was to avoid using the phrase "digital advertising," instead levying a tax on "targeted advertising," ostensibly agnostic to whether the advertising is electronic. Senate Bill 287, however, does not actually tax anything other than digital advertising. That's a problem under the Internet Tax Freedom Act, no matter how artful the legislative language.
The Internet Tax Freedom Act — a federal law — prohibits state and local governments from imposing discriminatory taxes on electronic commerce. Maryland's digital advertising tax has been fighting ITFA challenges since 2021 — and the legal battle is still unresolved five years later. A lower court ruled that Maryland's tax violated the federal Internet Tax Freedom Act and the US Constitution under the Commerce Clause and the First and Fourteenth Amendments. Quizlet
Utah is aware of this problem. Sen. Brady Brammer raised concerns during committee that the bill may be preempted by the Internet Tax Freedom Act. McKell said he would be happy to speak to that issue with Brammer off the record. That kind of off-the-record conversation — rather than a public legal analysis — suggests the bill's sponsors knew the legal vulnerability existed and proceeded anyway. AccurateTax
Affected taxpayers also may want to monitor whether Utah's tax draws legal challenges similar to those raised against digital advertising tax imposed in Maryland. Utah's enactment could prompt additional legislative activity, and businesses should monitor whether this type of tax withstands legal scrutiny. TaxJar
The first annual return under Utah's targeted advertising tax isn't due until 2028 — giving significant time for legal challenges to work through the courts before any tax actually changes hands.
Utah joining Maryland in taxing digital advertising is significant — but it's the beginning of a trend, not the end of one.
California, Massachusetts, Minnesota, New York, Pennsylvania, and Rhode Island are also considering digital ad taxes. We've covered Minnesota's proposal in depth — a bill that passed the House and is now in the Senate, covering billboard advertising, search engine marketing, and web campaign planning. Pennsylvania's digital ad tax passed its House 139-63. New York has similar proposals advancing. Grocery Dive
As of October 2025, Maryland has raised $418 million since the digital ad tax was put in place in 2022 — despite the legal challenges. That $418 million is the number every other state legislature is staring at when they consider whether to follow Maryland's and Utah's lead. Hands Off Sales Tax
The legal battle will eventually be resolved — either by the Supreme Court taking a case, Congress amending ITFA, or states finding a legal structure that survives judicial scrutiny. Until then, every state digital advertising tax exists in a legally uncertain space where collection and compliance depend on the outcome of litigation that may take years.
If you're a large advertising platform that may qualify as a "targeted advertising entity":
Affected taxpayers should assess whether their systems can track Utah impressions and compute the required apportioned receipts amount. They also should begin evaluating data sources and compliance processes ahead of that date. In addition, businesses should monitor Utah State Tax Commission guidance and rulemaking, particularly around sourcing, reporting, return filing, and documentation.
The first return isn't due until 2028 — but building the data infrastructure to track Utah impressions and calculate apportioned receipts takes time. Start now.
If you're a business that advertises on platforms that may qualify:
Build the assumption of higher Utah advertising costs into your 2027 marketing budget. The pass-through from platforms to advertisers may not be labeled as a "targeted advertising tax" on your invoice — it may just appear as a rate increase. Monitor your ad platform's Utah-specific pricing and be prepared to adjust your campaigns or budget accordingly.
If you're a streaming service, SaaS company, or digital content provider:
SB 162's clarification of Utah's digital taxability rules means your products are taxable if they weren't already configured as such. Verify your Utah sales tax setup covers streaming subscriptions, digital downloads, gaming services, and SaaS — and that you're registered and collecting correctly.
Everyone: Monitor the legal challenge landscape. If a court issues an injunction against SB 287 before January 2027, the compliance question becomes moot until the case resolves. Don't build expensive compliance infrastructure around a law that may be blocked before it takes effect.
Advertising into Utah or selling digital content and want to understand how SB 287 and SB 162 affect your sales tax obligations in 2027? Book a free consultation with our team at sales.tax. We'll review your Utah digital tax exposure and help you prepare for both laws before January 1.