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California Gov. Gavin Newsom announced his latest budget plan on Thursday, totaling $349.4 billion, the largest in the state’s history. The proposal includes a new 7.25% state sales tax on cloud-based software.
Currently, sales tax is only paid on software purchased in physical form, whether that’s through software sold as part of a new hardware purchase or tangible media. Cloud-based software and software as a service (SaaS) applications aren’t taxed in the same way, but Newsom’s proposal would change that.
As KCRA notes, the new tax would apply to software like Microsoft Office, Adobe, and QuickBooks, as well as Slack and Workday. Roughly half of the states currently tax SaaS products, and Newsom argues it would just mean bringing California in line with dozens of other states.
Over the past three years, the state of California brought in $16.5 billion more than it had anticipated, largely credited to soaring tax revenue from the seemingly unstoppable stock market and technology sector. The Dow Jones Industrial Average closed up over 300 points at 50,063 on Thursday, retaking the 50,000 mark and nearing the record high of 50,188 achieved on Feb. 10. The S&P 500 and Nasdaq closed at record highs on Thursday.
