Get your software business ready for California's Jan 1 change.

California's ~30-year software/SaaS tax exemption ends January 1, 2027 (SB 122). If your decision says you're taxable and under the $5M carve-out, you collect and remit — starting in the new year. This pack turns that finding into a finished checklist: register, fix your billing data, update invoices, and calendar your filings.

A · Your situationRecord the decision from the tool

B · Register with CDTFAStep-by-step seller's-permit walkthrough

C · Billing-address auditYour single biggest control

D · Invoice & notice wordingLine item, price change, customer email

E · 2027 remittance calendarFilings, rates, sourcing, records

F · One-page readiness checklistThe whole plan on one sheet

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One-time · digital · works with the free decision tool

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01Part A · Your situation

Fill this in from your decision-tool result. Keep it in your compliance file — it's your written reasoning if anything is ever questioned.

Question	Your answer (write it here)
Product classification
CA nexus? (≥ $500K CA sales OR physical presence)
$5M carve-out bracket (over / at-or-under)
Registration reflects: collect and remit

Good newsUnder the $5M carve-out you collect and remit, but you are not reclassifying your entire business. Most of the work below is bookkeeping and data hygiene, not legal restructuring.

02Part B · Register with the CDTFA

You register once, before you start collecting. California's Department of Tax and Fee Administration (CDTFA) issues a seller's permit / account number you'll put on invoices.

What to have ready

Federal EIN (or SSN) and business legal name + address
Exact product description(s) and whether sold as SaaS / download / license
Estimated monthly California sales; expected start date of sales to CA customers
Business formation docs (LLC/single-member filing) if applicable

Steps

Go to cdtfa.ca.gov → "Register a new business" → start the online registration (these sellers' permits are free).
Choose the account/products that match a digital-software sale; note gross receipts from software.
Enter billing and contact info; list any secondary owners.
Set your activity start date. If you start collecting Jan 1, 2027, register before then.
Save the account/seller's permit number — it goes on invoices and filings.
Set a reminder to file the first return in the quarter you start collecting.

Already have a seller's permitLog in to your CDTFA account and confirm your product codes + activity now; add the software/sales-tax line before Jan 1 rather than retroactively.

03Part C · Billing-address audit

SB 122 sources by the purchaser's address — not by where software is used. Your billing address is the first tiebreaker, so junk or missing billing data either over- or under-charges you.

Confirm you capture the customer's billing address at checkout (not just email+coupon).
Validate address format (USPS-style) so "Los Angeles" doesn't become "LA, 90001 vs 90010".
Define the source of truth: billing → delivery → payment-instrument mailing → last known.
Flag CA billing addresses as tax-A in your billing system; route them to the CA rate.
For non-CA billing addresses, confirm you do not allocate by use — record them as out-of-state.
Add a note to terms/invoice: "Sales tax applies to California destinations; rate shown at checkout."

Watch-outYou can't assign CA tax based on where the software is used or where the buyer's HQ is — SB 122 uses the destination hierarchy above. A clean billing address is the difference between collecting correctly and a painful reconciliation later.

04Part D · Invoice & notice wording

Invoice line item

Add a dedicated, itemized line to every CA-destination invoice:

Line 1 — Product license (SaaS subscription) $1,000.00
California sales & use tax (7.25% + district, 10.25%) $102.50

Total $1,102.50

Notice of price change (to existing CA customers)

Subject: California sales tax applies from January 1, 2027
Starting January 1, 2027, California law (SB 122) requires us to add sales tax to software and SaaS sold to California destinations. Your next invoice will show a separate "California sales & use tax" line at the rate for your billing address. Your plan price itself is unchanged. Questions? Reply and we'll route you to the right person.

Edit to your brand/voice. Send it 30–45 days before the deadline so customers aren't surprised on their first 2027 invoice.

05Part E · 2027 remittance calendar

Quarter	Return covers	Filings typically due
Q1	Jan 1 – Mar 31	End of April (Apr 30)
Q2	Apr 1 – Jun 30	End of July (Jul 31)
Q3	Jul 1 – Sep 30	End of October (Oct 31)
Q4	Oct 1 – Dec 31	End of January (Jan 31, 2028)

Exact due dates depend on your CDTFA filing frequency (often quarterly). Confirm in your online account; file even for a zero quarter.

Rates & sourcing at a glance

State rate: 7.25%.
Combined rate: 7.25% + district taxes — commonly ~10.25–10.75%, sometimes higher. Look up the exact per-address rate in the CDTFA rate finder.
Source to: billing address → delivery → payment-instrument → last known mailing address; no CA address = out of state.
Remember: buyers with no nexus owe use tax, not you. Above $5M, liability shifts to the purchaser.

Records & audit readiness

Store each invoice showing the tax line + destination address.
Keep resale/exemption certificates from B2B buyers you don't charge.
Retain the source of each billing address (checkout data, validation results).
Re-confirm the $5M test yearly — from Jan 1, 2028 it uses the current or preceding year.

06Part F · One-page readiness checklist

Print this page. Check each item, date it, and you're done.

Confirmed product classification (Part A)
Recorded your nexus + carve-out answer (Part A)
Registered with CDTFA; saved the account number (Part B)
Validated CA billing addresses at checkout (Part C)
Routed CA destinations to the correct rate (Part C)
Added the tax line to invoice template (Part D)
Sent the price-change notice to CA customers (Part D)
Blocked out the four filing dates above (Part E)
Stored invoices + certificates for audit readiness (Part E)
Set a 2028 reminder to re-check the $5M threshold (Part E)

Done.You're registered, priced, invoiced, and calendared. Keep part A's table with your records — that written reasoning is your quiet audit defense.

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Disclaimer. This material is informational only and is not legal, tax, or accounting advice. It is not a substitute for advice from a qualified professional or the CDTFA. SB 122 is effective January 1, 2027; CDTFA regulations implementing it are still pending, and treatment of borderline products (custom / AI / infrastructure bundles) may change. Source: SB 122 statutory text (California RTC §§ 6016 / 6016.1) and professional summaries (Avalara, Baker Tilly, Withum, TaxCloud). cassaprep.com is an independent, non-affiliated decision aid. Verify current rules and filing deadlines in your CDTFA account before acting.