Beginning January 1, 2027, California Senate Bill 122 (SB 122) will expand sales and use tax to select types of computer software, including downloaded and Software-as-a-Service (SaaS) subscriptions accessed remotely through a supplier or a third-party hosted environment, which were previously untaxed. UCSF software purchases, subscription renewals, and associated technology procurements are expected to become subject to state sales and use tax.  

Departments planning software purchases or subscription renewal should review their upcoming needs and consider whether purchases can appropriately be completed or prepaid during the 2026 calendar year, before the new tax requirements take effect.  

What You Need to Know

• SB 122 takes effect January 1, 2027
• ALL software, SaaS subscriptions, and associated technology purchases are expected to become subject to California sales and use tax—not just software delivered on physical media as in the past
• Software maintenance is expected to become subject to a 50% tax (details pending)
• UCSF Finance is actively evaluating implementation impacts
• Departments should begin reviewing planned software purchases and renewals now to identify opportunities to complete purchases in 2026

Supply Chain Management will provide additional guidance as implementation requirements and regulations are finalized.

Helpful Resources

• Buying Software and Cloud Computing page
• Making Purchases at UCSF