Beginning January 1, 2027, California sales and use tax will generally apply to prewritten software delivered electronically or accessed remotely, including many Software-as-a-Service subscriptions. CALIFORNIA — If your business sells software, provides access to an online platform or pays for software subscriptions, a tax change belongs on your 2027 planning list. Under Senate Bill 122 , signed into law June 29, 2026, California is expanding the sales and use tax definition of tangible personal property to include certain digital products and associated copyright or patent interests. That means retail sales of covered products in California—and covered products purchased from a retailer for storage, use or other consumption in California—may be taxable beginning January 1, 2027 . The change generally affects sellers of prewritten software, SaaS providers, businesses that license or provide remote access to prewritten software, and the customers who buy those products. What counts as a digital product? For this law, a digital product is prewritten computer software delivered on physical storage media, transferred electronically or accessed remotely. Prewritten software is software held for general or repeated sale or lease. It can qualify even if it was originally developed for a particular customer or for a company’s own use. A combination of two or more prewritten programs can also qualify. What is outside this definition? The law does not classify every digital purchase as a taxable digital product. The following are excluded from its digital product definition: Digital assets, such as cryptocurrency Digital audio works, such as music, spoken recordings and ringtones Digital audiovisual works, such as movies and videos with sound Digital books, or eBooks Digital infrastructure, such as cloud platforms customers use to create, deploy or run their own software applications Digital video game products Digital visual works, such as computer-generated artwork The law also provides exemptions for custom computer software , digital products representing a service other than SaaS, digital products transferred with reproduction and distribution rights, and digital products purchased solely for use outside California. Businesses should review the details of a transaction before treating it as excluded or exempt. A $5 million rule for certain large purchases In some transactions, responsibility for paying the tax can shift from the retailer to the purchaser. The rule concerns a retailer’s aggregate gross receipts from digital products sold to the same purchaser that are transferred electronically or accessed remotely. For 2027 , the threshold is more than $5 million in that calendar year . Beginning January 1, 2028 , the test looks at whether those receipts exceeded $5 million in the current or preceding calendar year. When the rule applies, the purchaser may need a Use Tax Direct Payment Permit and may have to report and pay the tax directly to the California Department of Tax and Fee Administration (CDTFA). Location matters for local taxes For digital products transferred electronically or accessed remotely, the place of sale for local and district tax reporting is generally the customer’s address. The place of use is where the person accessing the product is located. That distinction matters when a company’s billing address and its software users are in different places. CDTFA explains the rules in its Tax Guide for Retailers and Purchasers of Digital Products . What sellers need to do California digital product sellers that are not already registered with CDTFA may need to obtain a seller’s permit , file sales and use tax returns, and report and pay tax on taxable retail sales. Out-of-state sellers that are engaged in business in California under Revenue and Taxation Code section 6203 may need a Certificate of Registration—Use Tax . They would collect and report use tax on covered sales to California consumers and pay it to CDTFA. Registration is available through CDTFA Online Services . The UBJ takeaway: Software sellers can use the months before January 2027 to review their products, customer locations, invoicing and registration needs. Buyers can review their software agreements and ask vendors how the new tax will appear on invoices. For the definitions, exemptions and reporting rules, start with CDTFA’s digital products tax guide

Beverly Kuykendall helps businesses navigate complex markets, build stronger partnerships and turn ambitious ideas into workable plans. Some business leaders see a procurement requirement and stop at the obstacle. Beverly Kuykendall asks what it would take to move forward. Over decades in federal acquisition and commercialization, Kuykendall has helped organizations work through the demands of government contracting while keeping their commercial goals in view. Her career has included executive roles as President of Government Business, Chief Strategy Officer and President. In each, she has worked at the point where strategy must become something a team can actually execute. Today, Kuykendall advises mission-driven organizations and manufacturers seeking new routes to growth. For companies pursuing domestic production, that may mean beginning with practical steps such as packaging, labeling, kitting, light assembly or fulfillment. These staged solutions can help a manufacturer establish domestic capacity and enter a market while building toward a larger goal. She also helps manufacturers develop reseller and distribution programs with clear standards for selecting partners, onboarding them and measuring performance. The aim is to grow revenue while protecting the relationships and reputation a business has worked hard to build. Kuykendall’s strength lies in making complicated systems understandable and actionable. She sees how procurement rules, supply chains and commercial partnerships fit together—and where an organization can make its next move with confidence. For entrepreneurs and business leaders trying to enter a demanding market, that perspective matters. A complex path can still be a path. Kuykendall’s work helps organizations find it, prepare for it and take the next step.