Overview
- Gov. Gavin Newsom, who unveiled the plan Thursday, asked lawmakers to tax digital prewritten software starting January 1, 2027.
- His office projected $450 million for the state’s general fund this budget year and $900 million in later years, plus $560 million for local governments rising to $1.1 billion.
- He framed the change as fairness between store purchases and downloads, estimated about 75% of affected transactions are business-to-business, and said streaming services are not included.
- Digital prewritten software means standard, off-the-shelf programs people download, such as common office or accounting tools, rather than custom code for one client.
- Large vendors like Microsoft and Salesforce could face new pressures as costs shift to buyers, and HSBC pushed back on market-doom fears, while the proposal now goes to the Legislature with Newsom noting 35 states tax digital downloads and 24 tax SaaS.