California Signs SB 122: Every SaaS and AI Subscription Sold Into the State Gets 8-10% More Expensive on January 1, 2027

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SaaStr published a full breakdown on 2026-09-05 of SB 122, signed by Gavin Newsom on 2026-06-29, which extends California sales tax to prewritten software "transferred on physical media, transferred electronically, or accessed remotely" starting 2027-01-01 at 7.25% state plus local district tax, reaching roughly 10.75% in some metros. California projects about $2 billion a year. Custom software, IaaS and PaaS are exempt while seat-priced AI application subscriptions are taxable, and consumption-based AI pricing (per-token, per-API-call) is explicitly unresolved, which hands every vendor an immediate incentive to reprice off seats and onto meters before the effective date.