SALT LAKE CITY — Governor Spencer Cox on Thursday signed into law a bill to tax adult websites and make them liable if minors circumvent geolocation.
In addition to updating investigation and enforcement rules for age verification in Utah, SB 73 will impose an excise tax of 2% on adult sites operating in the state. The new tax will apply to transactions for “access to digital images, digital audio-visual works, digital audio works, digital books, or gaming services,” including streaming or subscription access to those works and services.
Industry attorneys have cited a number of potential legal hurdles such a tax might face. However, Alabama passed a similar 10% tax last year, while legislators in Virginia and Pennsylvania have floated the idea of doing the same.
Revenue from the proposed new tax in Utah will be directed to a state account for funding “(a) mental health treatment programs for minors affected by material harmful to minors; (b) educational programs for parents, guardians, educators, and minors on the mental health risks associated with material harmful to minors; (c) early prevention and intervention programs for minors at risk of mental health harm from material harmful to minors; and (d) research and public awareness campaigns addressing mental health harm to minors caused by material harmful to minors.”
VPN Requirements
The legislation also includes a provision stating: “An individual is considered to be accessing the website from this state if the individual is actually located in the state, regardless of whether the individual is using a virtual private network, proxy server, or other means to disguise or misrepresent the individual’s geographic location to make it appear that the individual is accessing a website from a location outside this state.”
The VPN provision reflects growing concern about the widespread use of techniques to circumvent age verification, which has inspired both state and federal efforts to close that practical loophole.
In Ohio, a bill titled the “Innocence Act” would require adult sites to “utilize a geofence system maintained and monitored by a licensed location-based technology provider” to dynamically monitor a user’s physical location and ascertain whether the user is located in the state, and thereby subject to age verification.
Meanwhile in Washington, the proposed Kids Internet and Digital Safety (KIDS) Act, which would make age verification by adult websites federal law, includes a provision requiring sites to take “reasonable measures” to address circumvention of age verification.
Finally, as XBIZ reported earlier this month, the state of Indiana is suing Aylo, alleging that the company and its affiliates have violated the state’s AV law by failing to prevent access by users using virtual private networks to avoid geolocation — even though Indiana law does not specify a duty to account for intentional circumvention of geoblocking.
The VPN language in SB 73 could similarly impact enforcement of Utah’s existing age verification law, and/or lead to further legal tests of whether sites can be held accountable for access by users who circumvent geoblocking.
The VPN provisions of SB 73 will take effect May 6. The new tax provisions will take effect Oct. 1.
