California will tax SaaS and digital prewritten software from 1 January 2027, regardless of delivery method. The state rate is 7.25%, rising above 10% with local rates. Buyers with receipts over $5 million must self-assess use tax.
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Key Takeaways
From 1 January 2027, California's Department of Tax and Fee Administration will enforce sales and use tax on digital prewritten software and SaaS subscriptions.
From 1 January 2027, the state sales tax rate for digital prewritten software in California is 7.25%, rising above 10% when local jurisdiction rates are applied.
From 1 January 2027, if a seller's gross receipts from remotely accessed or electronically delivered digital products to a specific buyer exceed $5 million in a calendar year, the buyer becomes responsible for self-assessing and remitting use tax directly to the CDTFA.
From 1 January 2027, custom software prepared to the order of a single customer remains exempt from sales and use tax in California.
From 1 January 2027, digital assets such as cryptocurrency, digital audio, visual, audiovisual works, digital books, video games, IaaS, and custom software remain outside the new tax scope in California.
Primary source
Read the full article at VatITThis summary was published on VATfaqs.com on 21 July 2026. It relates to VAT developments in United States. The original source is VatIT.
