Additional Coverage:
- Gavin Newsom proposes a California digital software tax (businessinsider.com)
California Governor Gavin Newsom is pushing for a new tax measure that would extend the state’s sales tax to cover digital software purchases. His rationale: it’s unfair that consumers pay sales tax on in-person software sales but not on digital downloads.
If approved, this change could pose challenges for major software and SaaS companies like Microsoft and Salesforce, which are already navigating a tough market. Newsom’s proposal arrives in the wake of a steep sell-off in tech stocks, often referred to as the “SaaSpocalypse,” driven by concerns that advances in generative AI and automated coding might disrupt traditional software offerings.
Newsom highlighted that about 75% of these transactions are business-to-business, noting this as a factor in why streaming services aren’t currently targeted for taxation, though the legislature might reconsider that stance in the future.
Financially, the new tax is expected to generate $450 million in the current budget year and $900 million annually thereafter for California’s general fund. Local governments could see $560 million this year and $1.1 billion in subsequent years from the tax revenues.
This proposed tax is part of Newsom’s broader $350 billion spending plan aimed at maintaining a balanced state budget for the next two years. With his eye on the future, Newsom remains a prominent figure in Democratic politics and a potential candidate for the 2028 presidential race.
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- Gavin Newsom proposes a California digital software tax (businessinsider.com)