Taxation.
What changed between versions
Expands 'tangible personal property' under the Sales and Use Tax Law to include digital products (prewritten computer software) and associated copyright or patent interests, making them subject to sales and use tax effective January 1, 2027.
Imposes a 100% tax on any settlement fund payment from the federal Anti-Weaponization Fund (established May 18, 2026) or any subsequent fund, settlement, or agreement, for taxable years beginning on or after January 1, 2026 and before January 1, 2030. The tax is not subject to reduction by deductions or credits.
Changes the voting requirement from a simple majority to two-thirds approval of each house, because the bill results in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution.
Defines 'digital product' as prewritten computer software transferred on tangible storage media, transferred electronically, or accessed remotely. Explicitly excludes digital assets (crypto), digital audio works, digital audiovisual works, digital books, digital infrastructure (cloud services), digital video game products, and digital visual works.
Establishes a $5 million annual gross receipts threshold: retailers exceeding this amount are relieved of sales tax collection on electronically transferred or remotely accessed digital products, and purchasers must self-assess and pay use tax directly to CDTFA. The threshold adjusts every five years based on California CPI.
Extends the $5 million business credit limitation (currently set to expire for taxable years beginning before January 1, 2027) through taxable years beginning before January 1, 2030. For taxable years beginning on or after January 1, 2030, sets a new limit of 70% of total taxes imposed or $5 million, whichever is greater.
Reduces the annual minimum franchise tax from $800 to $400 for limited partnerships, limited liability partnerships, and LLCs for their first taxable year, for taxable years beginning on or after January 1, 2027 and before January 1, 2030.
Appropriates $750,000 from the General Fund to the California Department of Tax and Fee Administration to administer the new digital product sales and use tax provisions.
Prohibits local agencies from entering agreements that result in payment, transfer, diversion, or rebate of tax revenue from digital products transferred electronically or accessed remotely under Bradley-Burns local sales and use tax law.
Establishes detailed sourcing rules for digital products: in-person sales are sourced to the seller's place of business; non-in-person sales are sourced to the purchaser's known address (billing, then shipping, then payment instrument mailing, then general mailing address); if no California address is available, the sale is deemed outside the state.