Service history · Terms
QuietlyChanged checks California's public terms pages every day and records what changes, in plain English.
When does California start taxing software subscriptions?
January 1, 2027. Senate Bill 122 (Stats. 2026, ch. 23), approved June 29, 2026, adds digital products to what California's sales and use tax applies to. CDTFA's guide says "Beginning January 1, 2027, sales and use tax generally applies to the retail sale of a digital product."
What software is taxed?
Prewritten (off-the-shelf) computer software, whether it's on a disk, downloaded, or "accessed remotely," including software as a service (SaaS). Until now, California taxed software only when it came on physical media. Custom software written for a single customer stays exempt.
Are Netflix-style streaming, Spotify, audiobooks, e-books and games taxed?
No. SB 122 excludes digital audio works (music, ringtones, spoken word, audiobooks), digital audiovisual works such as movies and videos, digital books, digital video games played for entertainment (including in-game purchases), digital art, crypto and other digital assets, and cloud infrastructure and platform services (IaaS and PaaS).
How much is the tax?
California's statewide sales tax rate is 7.25%, and most areas add district taxes of 0.10% to 2.00%. At 7.25%, a $100-a-year software subscription costs $7.25 more.
Can I avoid it by prepaying an annual plan in December?
Probably not for subscriptions. CDTFA's draft Regulation 1600 says a subscription is a continuing sale and "Tax applies to payments received for subscription periods on or after January 1, 2027." The draft is not final. In its examples, software you get access to in December 2026 under a one-time sale is not taxed, but a license paid in December that can't be used until January 1, 2027 is.
What if the seller doesn't charge California tax?
You may owe use tax yourself. CDTFA says buyers may be responsible for reporting and paying use tax when software is bought for use in California from an out-of-state seller that isn't registered to collect it or didn't collect it. Software bought outside the state and used in California within 90 days is presumed bought for use in California.
How much will the tax raise?
The administration estimated $900 million a year for the state General Fund and $1.1 billion a year in local sales tax once it's in effect for a full year (2027-28 onward), according to the Legislative Analyst's Office.
Starting January 1, 2027, downloaded and cloud software (SaaS) sold to Californians gets sales tax of 7.25% or more. Streaming, music, audiobooks, e-books and games are excluded.