Client notice
California sales tax on software starts January 1
Last updated:
Starting January 1, 2027, California will apply sales tax to software you access over the internet, including cloud subscriptions like Microsoft 365. We're required by law to collect it, and it will appear as sales tax on your invoice. It's a state tax, not a BRITECITY price increase.
What we don't know yet
The state hasn't released final guidance on what's covered, especially software that's bundled with services. The California Department of Tax and Fee Administration (CDTFA) expects to finalize it in December. Once we review it and confirm what's taxable, we'll send you another update before your January invoice.
The state's notice: Sales and Use Tax Applies to Digital Products Beginning January 1, 2027 (CDTFA, PDF) (opens in new tab)
Tax-exempt organizations
If your organization is tax-exempt, send your current exemption certificate to ar@britecity.com so we have it on file. Your CPA is the right person for questions about how this affects your books.
Common questions
Is this a BRITECITY price increase?
No. It's a state tax. We collect it because the law requires it, and it goes to the state.
Which of my services will be taxed?
It's not final yet. The CDTFA expects to finalize guidance in December, especially for software bundled with services. We'll send you an update before your January invoice.
How much will it add to my bill?
It depends on the sales tax rate where you're located and which services end up taxable. We'll confirm once the state's guidance is final.
We're tax-exempt. What do we do?
Send your current exemption certificate to ar@britecity.com. The company name and address on it should match your account with us.
How does this affect our books or our own taxes?
That's a question for your CPA. We don't give tax advice.
Can you bill it differently so we avoid the tax?
We bill for the services you actually receive, and the tax follows what those services are under state law, not how the invoice is worded. Relabeling or splitting charges to avoid the tax isn't something we can do, and it would put both of us at risk in an audit. What we will do is apply the state's final guidance exactly as written, so anything that isn't taxable won't be taxed. For tax planning on your side, your CPA is the best resource.
We have locations outside California.
California's tax generally applies to software used at your California locations. Sites in other states follow that state's own rules, and some states already tax cloud software. To bill each location correctly, please send ar@britecity.com a current list of your service addresses and about how many people work at each one.
My invoice looks wrong after January 1.
Email ar@britecity.com with your invoice number and what looks off. Our accounting team will follow up.