California sales tax will apply to downloaded and cloud-based software
Sales tax extends to prewritten software downloaded or used remotely, not just software on a disk, but not music, video, books or games. For three tax years, new LLCs and partnerships owe $400, not $800, their first year, and the $5 million credit cap stays.
Who it affects
Software sellers and buyers, new LLCs and partnerships, and businesses with large credits
When
This law took effect on June 29, 2026, but the changes described here start on January 1, 2027.
- : Signed into law; Law took effect
- : The changes described here start to apply
- : The $400 first-year tax for LLCs and partnerships ends
Official text
California SB 122: Taxation.
On California Legislative Information. The official text is what counts; read it before you act.
Not legal advice. Plain-English summaries to help you find what changes and when. Not legal advice: read the official text, and ask a lawyer about your situation.