Why We Are Challenging the State’s New Targeted Advertising Tax

Last week, the Utah Taxpayers Association filed a legal complaint challenging a new state law passed during the 2026 legislative session.

This is not an action we take lightly. Utah’s governor and Legislature have been highly supportive of the Association and its goals over the years. They have worked hard to make Utah a taxpayer-friendly state. Some may view our legal challenge as a slap in the face to those efforts. We hope most people understand that is not the case.

Since its founding in 1923, the Utah Taxpayers Association has worked to protect all Utah taxpayers from unnecessary and overly burdensome taxes while advocating for sound tax policy in state law. In our evaluation, Senate Bill 287 will increase costs for Utah businesses and families while establishing a tax that does not meet our standards for good tax policy.

Senate Bill 287 imposes a tax of 4.7% on the Utah gross receipts of certain companies that provide targeted advertising. As written, the law primarily affects companies that offer online advertising targeted to specific audiences—a service traditionally provided by large technology companies.

It is reasonable to expect that many of these companies will not simply absorb the tax. Instead, they are likely to pass at least some of the cost on to their Utah customers. This was our primary concern during the legislative session. While some may view the legislation as merely a tax on major multinational corporations, the practical cost will likely be borne by Utah businesses and consumers. Some affected companies acknowledged as much during the legislative debate.

Unfortunately, our arguments did not carry the day. The Legislature passed the bill, and the governor signed it into law. Since then, we have worked with legal experts to analyze the statute and determine whether a legal challenge was warranted. We concluded that it was.

We believe the law conflicts with the federal Internet Tax Freedom Act, commonly known as ITFA. That law prohibits states from imposing discriminatory taxes on electronic commerce when comparable transactions conducted through other means are not similarly taxed. Utah does not impose this type of tax on advertising delivered through newspapers, radio, television, print publications or billboards. We therefore believe that singling out targeted online advertising violates ITFA.

We are also concerned that a company’s Utah tax status can change solely because its worldwide receipts cross one of the thresholds established in the law. A company could become subject to a new Utah tax even though its business activity within the state has not changed. It may not be using additional government services or earning any additional income in Utah, yet it would suddenly become responsible for paying a new state tax.

That is not sound tax policy. We also believe this structure raises serious constitutional questions under both the Commerce Clause and the Due Process Clause of the Fourteenth Amendment.

Protecting taxpayers from illegal or unconstitutional taxes is central to our mission. That is why we are moving forward with this challenge. We recognize that no outcome is guaranteed when a case goes to court. Nevertheless, we believe this issue is important enough to pursue so that the principles of sound tax policy Utah lawmakers have worked for decades to establish are protected.

We again express our appreciation for the work Utah’s elected officials have done to make our state the envy of many across the country when it comes to tax policy. Senate Bill 287 was, in our view, a misstep. We hope that, when this process is complete, taxpayer-friendly policies that treat all taxpayers fairly will ultimately prevail in Utah.