California Department of Tax and Fee Administration

California's SB 122 taxes the SaaS subscription while exempting the compute it runs on

Signed on June 29, 2026 and effective January 1, 2027, the law moves prewritten software into sales tax at 7.25% to 10.75% while leaving IaaS and PaaS outside the base, pricing a wedge between renting software and renting a machine.