California will start applying sales and use tax to certain digital products on January 1, 2027. The change comes from Senate Bill 122, signed on June 29, 2026, and the state’s tax agency — the California Department of Tax and Fee Administration (CDTFA) — has proposed emergency regulations to put it into practice, according to an October 8 alert from law firm K&L Gates.
The main target is software, including software-as-a-service (SaaS). But because the law uses the phrase “digital products,” plenty of people who sell ebooks, printables and PLR packs are wondering whether it reaches them. Here’s what the official guidance says — and what it doesn’t.
What the new law covers
Under SB 122, a “digital product” means prewritten computer software, whether it’s delivered on physical media, downloaded, or accessed remotely. “Prewritten” means software held for general or repeated sale, rather than built for one client. CDTFA’s special notice says the change mainly affects sellers of prewritten software, SaaS providers, businesses that license software, and the people who buy those products.
What’s excluded
The CDTFA notice lists several categories that are not “digital products” under the new rules:
- Digital audio works, such as music
- Digital audiovisual works, such as movies and videos
- eBooks (the statute’s term is “digital books”)
- Digital visual works, such as computer-generated art
- Digital video games
- Digital assets such as cryptocurrency, and digital infrastructure such as cloud platforms
The notice also lists exemptions, including custom software, products bought solely for use outside California, and products transferred with reproduction and distribution rights. That last one will catch the eye of anyone in the PLR world, since the right to reproduce and resell is the core of many PLR licenses. How it applies to a specific product, though, is a question for the final regulations and a tax professional.
What it means for PLR and digital product sellers
If you mostly sell ebooks, art-style printables, audio or video, the exclusions above are the part to read closely. If you sell software-like products — apps, plugins, scripts, SaaS tools or other “tool” products — you may fall inside the new definition. The notice doesn’t mention templates, printables or PDFs by name, so don’t assume either way.
Out-of-state sellers that are “engaged in business” in California may need to register with CDTFA and collect use tax on sales to California customers, the notice says. The detailed rules are still being finalized: K&L Gates points out that the regulations are proposed, not final, but the tax itself starts January 1, 2027 either way. For subscriptions that span that date, the proposed rules apply tax to payments covering periods on or after January 1.
What to do now
- List what you sell and sort it into software, SaaS or tools versus ebooks, art, audio and video.
- Ask your sales platform’s support team whether it will collect California tax on your behalf — don’t assume.
- Bookmark CDTFA’s tax guide for digital products and watch for the final regulations.
- If you sell software-type products to California buyers, talk to a tax professional before January. CDTFA notes that written advice from the agency can protect you in ways verbal advice can’t.
This article is general information, not tax or legal advice.
Sources
- CDTFA: Special Notice L-1036, Sales and Use Tax Applies to Digital Products Beginning January 1, 2027
- CDTFA: Tax Guide for Retailers and Purchasers of Digital Products
- K&L Gates: California Expands Sales and Use Tax to SaaS and Certain Digital Products Starting 1 January 2027
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