California to tax SaaS and digital products starting 2027

California's SB 122 extends sales and use tax to electronically delivered software and SaaS from January 1, 2027. Buyers whose purchases of such digital products from one retailer exceed $5 million in 2027 may become responsible for reporting and paying use tax.

• SB 122 takes effect on January 1, 2027
• Tax covers prewritten software and SaaS, not custom software
• $5 million purchase threshold shifts use tax liability to buyers
• California firms raised about $191.2 billion in VC in 2025