For years, California politicians talked about taxing big tech.
Now they found a way to tax the software almost everyone uses.
Starting January 1, 2027, California’s new rules will apply sales tax to a huge range of pre-written digital software and SaaS products.
Gavin Newsom’s new software tax goes way beyond corporate softwares, California Democrats are going to tax everything
They expect to make over $2 billion per year from this new tax, “They now define pre-written software as everything from Microsoft Office, Gmail accounts,… pic.twitter.com/wVUT6b77vx
— Wall Street Apes (@WallStreetApes) June 22, 2026
That means tools like Microsoft Office, Google Workspace, Gmail business services, Slack, QuickBooks, Adobe Creative Cloud, Zoom, Teams, Asana, antivirus software, project management software, and countless other subscriptions could face taxes that reach nearly 10% in some locations once local taxes are included.
The state expects hundreds of millions of dollars in new revenue almost immediately.
Eventually, the number could exceed $2 billion per year.
And that is what makes this interesting.
California is no longer looking for niche taxes.
It is looking at products businesses use every single day to operate.
Think about how many companies rely on cloud software now.
Accounting.
Email.
Video meetings.
File storage.
Design software.
Project management.
These are not luxury purchases anymore.
They are basic business utilities.
The timing is hard to ignore too.
California already faces constant complaints about business costs, regulations, and companies moving operations elsewhere.
Now the state is adding a new tax layer onto many of the digital tools those same businesses depend on.
Supporters will argue software should be treated like other taxable products.
Critics see something different.
They see a state government searching for new revenue sources because the old ones are not enough anymore.
The funny part is that software was supposed to reduce costs and make businesses more efficient.
Now in California, the software bill itself is becoming another tax bill.
California tax law article from GT Law firm: https://www.gtlaw.com/en/insights/2026/6/california-advances-budget-trailer-bill-to-tax-software-saas-and-limit-business-credits
News report from KCRA about the new tax: https://www.kcra.com/article/california-lawmakers-tax-increases-health-insurance-digital-software/71620656
PwC tax insight on California budget proposal: https://www.pwc.com/us/en/services/tax/library/california-budget-proposal-would-tax-saas-limit-credits.html