Document Type



Taxation-State and Local | Tax Law


This Issue Paper discusses how technology has overtaken the traditional ways the states tax the income of “content providers” that operate broadcast and cable networks, sell advertising, and produce content such as movies and television programs. This content is licensed at wholesale to distributors and along with the advertising, is watched by customers of these distributors on their televisions, smart phones, tablets, gaming consoles, and computers— either in their homes or on the move.

The so-called “model” for taxing multistate businesses like content providers--the Uniform Division of Income for Tax Purposes Act (UDITPA)--was developed in 1957 and has been adopted in whole or in part by most states. Obviously, a tax system built on a 1957 foundation cannot begin to cope with today’s highly technological and digital world. Without the benefit of a model that can accommodate the 21st century, the states have been left on their own to try to modernize their laws. The result has been constant change and flux.

This Paper endorses a new approach to the income taxation of content providers, one unaffected by, rather than becoming antiquated by, tomorrow’s technology. The approach assigns receipts of content providers based on the commercial domicile of their customers—an approach that will not be overtaken by technology and one that introduces stability, predictability, and certainty into the tax system and reduces litigation. Moreover, the rule captures the location of the customers and the true market of the content providers.