California set to expand sales tax to SaaS starting 2027

California Governor Gavin Newsom is set to sign the 2026-2027 state budget, which includes a trailer bill expanding California's sales tax to cover SaaS, effective January 1, 2027. This marks the first time California applies sales tax to software and technology services.

The bottom line: Businesses selling SaaS into California will need to register, collect, and remit California sales tax starting January 1, 2027 and will need to update their tax compliance systems and billing processes before the implementation date.