What changed
Starting January 1, 2027, California's Sales and Use Tax Law defines tangible personal property to include digital products, along with any copyright or patent interests associated with them. Retail sales of digital products in California, and their storage, use, or consumption in California, may be subject to sales and use tax. (L-1036; CDTFA guide)
What is a digital product?
Prewritten computer software that is delivered on tangible storage media, delivered electronically, or accessed remotely. "Prewritten" means software held for general or repeated sale or lease, even if it was originally developed custom or for in-house use. Combining two or more prewritten programs also counts.
Not digital products
- Digital assets (e.g., cryptocurrency)
- Digital audio works (music, spoken recordings, ringtones)
- Digital audiovisual works (movies, videos)
- Digital books
- Digital infrastructure (cloud platforms for customers to create, deploy, or run their own apps)
- Digital video game products
- Digital visual works (e.g., computer-generated artwork)
Exempt digital products
- Digital products representing a service, not including SaaS
- Custom computer software
- Digital products transferred with reproduction and distribution rights
- Digital products purchased solely for use outside California
Law: SB 122, signed June 29, 2026.
General information, not tax advice. This site summarizes public CDTFA guidance on Senate Bill 122 (Stats. 2026, ch. 23). It is not legal or tax advice, and it does not replace the law or CDTFA regulations. For your specific situation, consult a CPA or tax attorney, and consider asking CDTFA for written advice. Written advice can protect you, but phone advice cannot.