- California will begin taxing prewritten computer software sold or accessed online, including downloads and SaaS, starting Jan. 1, 2027; only certain items like custom software, cloud platforms for building/running a customer’s own software, and non-software digital media are excluded.
- The new software tax will be based on the customer’s location, so in Los Angeles County the combined sales tax on software will generally be 10.25% at the county rate and 11% or more in many cities.
- For subscription software that spans the effective date, CDTFA’s proposed rule would tax only the portion of the subscription period beginning on or after Jan. 1, 2027.
- Businesses buying more than $5 million per year in online software from one seller will be required to pay the tax directly to the state, rather than the seller collecting it.
- A separate California tax on health plans could also apply starting in 2027, increasing insurance premium costs.
Source: thesouthbound105.substack.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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