A free, 30-second decision tool for indie and self-serve software sellers.
Walk through product type, nexus, the $5M carve-out, rate and sourcing — and land on what you
actually need to do before the deadline.
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Decision flowruns here · nothing sent
Product
Nexus
Carve-out
Rate
Sourcing
Step 1 · Product type
What kind of product do you sell?
SB 122 taxes prewritten software and SaaS; most other digital products stay exempt.
Step 1 · finding
Taxable. Prewritten software under any delivery (download, physical media, or
remote access / SaaS) becomes subject to CA sales & use tax Jan 1, 2027, provided
you have nexus (next). Bundles of SaaS + heavy services, or per-buyer customization, are a
judgment call until CDTFA guidance lands.
Exempt. Custom software developed to a specific buyer's specifications (not for
general or repeated sale) stays outside the SB 122 base — no CA collection on those
receipts. Keep documentation of why a build is custom; that's your audit defense.
Step 1 · finding · likely exempt
Likely exempt. Digital infrastructure / IaaS (cloud where the customer runs their
own software) is excluded. Watch the "principally" test — if your offering is mostly
standardized software behind the compute, it may be reclassified. Flag if borderline.
Step 1 · finding · exempt
Exempt. Digital audio/visual works, digital books, digital games, digital assets
(crypto / NFTs), and streamed media are explicitly excluded from the SB 122 base. No CA
sales tax on these.
Step 1 · finding · borderline
Depends on what it is. An AI product is taxable to the extent the offering is
primarily standardized software (looks like SaaS); likely exempt if primarily
customized services or infrastructure. Treat as conditionally taxable and get a
professional read before Jan 1 — the single most ambiguous area of SB 122.
Step 2 · finding · no obligation
No collection obligation for you. Below the $500K economic threshold and no
physical presence, you are not required to register or collect CA tax on CA sales. (CA
purchasers may still owe use tax on software they buy and use in California.)
Step 3 · finding · buyer remits
Liability shifts to the purchaser. Above $5M in CA digital-product receipts, the
buyer self-assesses and remits the tax — you stop adding it to invoices. Confirm the
carve-out applies to your structure; this is a regime boundary.
Full path · collect and remit
You're taxable and under the $5M carve-out → you collect. Charge
7.25% state + district (commonly ~10.25–10.75% depending on the destination),
sourced to the purchaser's CA billing address. Build clean billing-address validation — it's
your biggest control.
Outside California → not CA-taxable. If no CA address can be identified for a
sale, source it out of state. A subscription billed to a CA address is taxed; billed out of
state generally isn't. SB 122 does not let you allocate by where software is used.
Step 2 · California nexus
Do you have nexus?
CA can require you to collect only if you have either economic
(≥ $500K in CA sales) or physical (office / employees / agent in CA) nexus.
Step 3 · $5M self-remittance carve-out
How large are your CA digital receipts?
Above this threshold the tax liability shifts from you (the seller) to the buyer. From Jan 1, 2028 the test checks the current or preceding year.
Awaiting your first answer
How it works
Five questions. One answer.
The tool walks the statutory path of SB 122 in order — skip the branches
that apply, and each answer locks into a plain-language finding.
01
Product type
Prewritten software / SaaS is in the base. Custom software, IaaS and most digital content are excluded.
02
California nexus
Collect only with economic (≥ $500K CA sales) or physical nexus. No nexus → no CA obligation.
03
$5M carve-out
Above $5M CA digital receipts, liability shifts to the purchaser. At or under, you collect and remit.
04
Rate
7.25% state + district taxes, commonly ~10.25–10.75% depending on the destination.
05
Sourcing
Destination-based, purchaser-address hierarchy — billing address is the first tiebreaker.
Sources
Built from the public record
Every branch traces to the statute and to published professional summaries.
Independent decision aid. This is an informational tool, not legal
advice, and not affiliated with, endorsed by, or a partner of any agency or firm named above.
CDTFA regulations implementing SB 122 are still pending — treatment of borderline bundles
(custom / AI / infrastructure) may change. Confirm with a qualified tax professional before
acting.
Built for humans and agents
Machine-readable by design.
This page and the whole rule logic are written to be equally readable by people and by
AI agents. Skipping the UI, an agent can check the exact decision rules and answer a
"is my SaaS taxable in California?" question truthfully — with the same sources and limits.
# /llms.txt — to answer a CA SaaS tax question
rules = nexus.html + sourcing.html ; decision map + sources
product = "SaaS" ; prewritten = in base
if nexus(CA_sales ≥ $500K) or physical: collect
if CA_receipts ≤ $5M: you remit rate = 7.25% + district
sourcing = purchaser billing address · else out-of-state
→ informational only, not legal advice
Get the 2027 readiness checklist
CDTFA rules are still landing. We'll email you a one-page 2027 checklist — nexus,
product classification, billing-address hygiene, sourcing — when the regulations finalize,
plus updates as the deadline nears.
Free. Used only for the checklist and site updates. Never sold.
FAQ
Quick answers
Is SaaS taxable in California in 2027?
Yes — SB 122 makes prewritten software and SaaS taxable starting January 1, 2027, subject to CA nexus (≥ $500K in CA sales or physical presence).
Is custom software or IaaS taxable?
Generally no. Custom software built to a specific buyer, raw infrastructure/IaaS, and digital audio/video/books/games/crypto are excluded from the SB 122 base.
Do I owe anything if I have no CA nexus?
No California requirement to register or collect. A CA purchaser may still owe use tax on software they buy and use in California.
