California’s Governor Gavin Newsom proposed a tax on digital prewritten software on Thursday, aimed at creating a level playing field between online and in-store software purchases.
Newsom suggested expanding the state sales tax to include digital prewritten software, noting the unfairness of consumers paying a 7.25% sales tax on in-store software purchases while those buying online aren’t taxed.
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Newsom said during a press conference that he frequently shops at Best Buy because he lives nearby. “And I’m paying sales tax on a lot of this prewritten software. And then I find out that all my friends that aren’t near a Best Buy, they’re downloading and they are not paying sales tax. How is that fair?”
The proposal, pending approval from the California legislature, is set to become effective on January 1, 2027. The Governor noted that 35 states already tax digital prewritten software, and 24 states have a SaaS tax.
