California SB 122: Sales Tax on Your enQ Subscription Is Changing January 1, 2027

Starting January 1, 2027, enQ will be required to collect and remit sales/use tax on software-as-a-service (“SaaS”) in California. If your enQ account has a California service address, the software portion of your subscription will be taxed at the 7.25% statewide rate plus the applicable local rate, a combined rate of 7.25% to 11.25% depending on your location. The tax will appear as a separate line on your invoice.

Governor Newsom signed Senate Bill 122, which amends the Revenue and Taxation Code to tax prewritten software regardless of how it is delivered: on physical media, by download, or accessed remotely. For decades, California taxed only software delivered by physical medium (e.g., on a disk). SB 122 extends California’s sales/use tax to remotely accessed software (SaaS).

Sales are sourced to the service address on your account, so California companies will see the tax beginning with January 2027 billing. This change does not impact sales sourced outside of California. The new tax applies to the software portion of your invoice; the VoIP portion remains unchanged.

This post is provided for general information and is not tax advice for your specific situation. Primary sources: Senate Bill No. 122 (2025–2026); CommLaw Group, California Changes the Tax Equation for Cloud Communications.