California\u2019s Governor Gavin Newsom proposed a tax on digital prewritten software on Thursday, aimed at creating a level playing field between online and in-store software purchases.<\/p>\n
Newsom\u00a0suggested expanding the state sales tax to include digital prewritten software, noting the unfairness of consumers paying a 7.25% sales tax on in-store software purchases while those buying online aren\u2019t taxed.<\/p>\n
Newsom said during a press conference that he frequently shops at Best Buy because he lives nearby. \u201cAnd I\u2019m paying sales tax on a lot of this prewritten software. And then I find out that all my friends that aren\u2019t near a Best Buy, they\u2019re downloading and they are not paying sales tax. How is that fair?\u201d<\/p>\n
The proposal, pending approval from the California legislature, is set to become effective on January 1, 2027. The Governor noted that 35\u00a0states already tax digital prewritten\u00a0software, and 24 states have\u00a0a SaaS tax.<\/p>\n
The proposed tax is anticipated to generate substantial revenue for the state and local budgets.\u00a0Projections from Newsom\u2019s office suggest the tax could bring in $450 million for the state\u2019s general fund this budget year and double that in subsequent years. It could also\u00a0generate $560 million in local\u00a0tax revenues\u00a0this budget year and $1.1\u00a0billion in the following years.<\/p>\n
Gavin Newsom proposed a revised $350 billion California budget that eliminates the deficit for this year and next year, while largely avoiding major spending cuts and limiting new spending initiatives.<\/p>\n
Proposed Tax Adds To SaaS Worries<\/p>\n
However, HSBC dismissed fears of a \u2018SaaSpocalypse\u2019, predicting that software will benefit<\/a> from AI’s development. The bank also highlighted that it would be neither practical nor cost-effective for companies to rely on AI to build their own in-house software.<\/p>\n Disclaimer:\u00a0This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.<\/p>\n Image via Shutterstock<\/p>\n