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06 July 2026

California governor signs budget trailer bill taxing digital software, extending the limitation on business tax credits

On June 29, 2026, California Governor Gavin Newsom signed into law Senate Bill 122 (SB 122), the state's budget trailer bill for the 2026-27 fiscal year. SB 122 expands the state's sales and use tax base to include digital products such as prewritten software and software as a service (SaaS), extends the existing limitation on utilizing business tax credits and reduces the first-year minimum annual tax for certain pass-through entities. These changes are discussed in Tax Alert 2026-1375.

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Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor

Document ID: 2026-1414

 

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