It already does this.
Please provide more information on when this doesn't work for you. Is
the "Mute" menu item in the sound menu checked when sound is on mute,
but the icon in the panel shows that volume is above 0? How about the
"Mute" checkbox in System Settings > Sound?
** Changed in: indicator-sound (Ubuntu)
Status: Confirmed => Incomplete
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https://bugs.launchpad.net/bugs/1332858
Title:
Speaker icon should change to indicate that sound is muted
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