A California budget subcommittee heard a May Revision proposal Tuesday to expand the state sales and use tax to electronically delivered pre-written software and software-as-a-service, a move the administration said would bring in $450 million for the General Fund in 2026-27 and $900 million a year on an ongoing basis.
According to the hearing summary and transcript materials from Assembly Budget Subcommittee No. 5 on State Administration, the proposal would take effect Jan. 1, 2027. CDTFA officials also said the department would need $750,000 annually to implement and administer the expanded tax, including $450,000 from the General Fund and $300,000 in reimbursements.
Industry groups publicly opposed the proposal during the hearing. The materials identify California Taxpayers Association representative JC Leon and TechNet representative Jose Torres as speakers against taxing pre-written digital software.
CDTFA chief counsel Chris Schatz also addressed how technology transfer agreements could be treated under the proposal, according to the hearing materials. The subcommittee heard the item as part of a broader May Revision session that also included tax conformity, business tax credit changes, and other budget proposals.
The proposal was still under consideration at the hearing and no subcommittee vote was included in the materials provided.
