TLDR Tech / Founders
California Is Taxing SaaS and AI Tools and Is About to Make Your Software 8-10% More Expensive. Here's What SB 122 Does to Buyers and Vendors
California signed SB 122 on June 29, which will apply sales tax to SaaS and AI tools starting on January 1. The rate is 7.25% at the state level plus local district taxes, so the total lands between 7.25% and 10.75% depending on where the buyer sits. Sacramento projects about $2B a year. Remote sellers cross into collection duty at $500,000 in California sales. Every California customer's invoice grows by up to 10.75% that day, and the vendor collects it, so pricing pages, billing systems, and renewal conversations all change before year-end.
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