Orem police say Flix Club owner Daniel Dean Thompson, 31, and Issac Lifferth, 24, were booked into the Utah County jail on charges of sexual abuse and unlawful sexual activity with a 14-year-old.
CBS Station KUTV in Salt Lake City reports that the shocking discovery came when a mother found a $20 bill in her daughter's room last week and questioned her about where the money came from.
The girl confessed that she and a friend had been paid for sexual favors by an older male.
Lifferth was additionally charged with patronizing a prostitute and was also in possession of a prescription drug medication without a prescription.
Thompson's Flix Club was one of several Utah-based video outlets that traded in edited versions of R- and PG-13-rated films, catering to clientele who wanted to watch hit movies without nudity, sex, language or graphic violence.
Such video editing operations came under the gun of Hollywood studios and the Directors Guild of America.
In a case brought by the DGA, a federal judge ruled in 2006 that editing out material (such as Kate Winslet's bare breasts in "Titanic") violated copyright laws. The decision was against a Utah company called Clean Flicks.
Thompson, who was a franchise operator for Clean Flicks, opened Flix Club last year, similarly trading in edited videos but claiming that such editing was for "educational use."
Threats of lawsuits from the Hollywood studios forced him to agree to shut down on December 31.