Taxation.

Header changed from 'AMENDED IN ASSEMBLY JUNE 12, 2026' to enrolled bill format showing 'Passed the Senate June 18, 2026' and 'Passed the Assembly June 15, 2026,' along with signature blocks for the Secretary of the Senate, Chief Clerk of the Assembly, and Private Secretary of the Governor.

The bill title was shortened by removing the phrase 'relating to the Budget Act of 2025' from the opening act description.

The legislative information line at the end of the digest was simplified from 'Vote: majority 2/3. Appropriation: no yes. Fiscal committee: no yes. State-mandated local program: no yes.' to just 'Appropriation: yes.'

All line numbers were removed and text was reflowed throughout the bill body, consistent with standard enrolled bill formatting.

Redefines 'tangible personal property' to include digital products (prewritten computer software transferred on tangible storage media, electronically, or accessed remotely), bringing them within the scope of California sales and use tax. Excludes digital assets, digital audio works, digital audiovisual works, digital books, digital infrastructure (cloud services), digital video game products, and digital visual works.

Imposes a 100% tax on settlement fund payments from the federal Anti-Weaponization Fund (or any subsequent fund, settlement, or agreement) for taxable years beginning on or after January 1, 2026 and before January 1, 2030. Taxes are not subject to reduction by deductions or credits.

Creates exemptions for digital products purchased solely for use outside California or in interstate/foreign commerce (Section 6372), and for services provided in electronic form where human effort originated after customer request (Section 6372.1).

Establishes a $5 million annual gross receipts threshold: retailers exceeding this amount are relieved of sales tax collection on digital products transferred electronically or accessed remotely, and purchasers must self-assess and pay use tax directly to the department. The threshold is adjusted for inflation every five years starting October 1, 2031.

Prohibits local agencies from entering agreements that result in payment, transfer, diversion, or rebate of tax revenue from digital product sales transferred electronically or accessed remotely (Government Code Section 53084.5).

Adds new definitions for 'digital product,' 'accessed remotely,' 'transferred electronically,' 'tangible storage media,' 'prewritten computer software,' and several excluded categories in Sections 6016.1 and 6016.2 of the Revenue and Taxation Code.

Appropriates $750,000 from the General Fund to the California Department of Tax and Fee Administration for administering the new digital product sales and use tax provisions.

Reduces the annual minimum franchise tax from $800 to $400 for limited partnerships, limited liability partnerships, and LLCs for their first taxable year, applicable to taxable years beginning on or after January 1, 2027 and before January 1, 2030.

Extends the $5 million business credit limitation (previously set to expire January 1, 2027) through taxable years beginning before January 1, 2030. For taxable years beginning on or after January 1, 2030, sets a new limit of 70% of total taxes imposed or $5 million, whichever is greater.

Changes the required vote from a simple majority to two-thirds of each house of the Legislature, due to the bill containing a tax increase under Article XIII A of the California Constitution.

Establishes rules for determining the place of sale or purchase of digital products, including a priority order for purchaser addresses (billing, shipping/delivery, payment instrument mailing, then general mailing address) when no in-person transaction occurs.

Header changed from enrolled bill format (Senate/Assembly passage dates and clerk signatures) to chaptered format with 'STATE OF CALIFORNIA AUTHENTICATED ELECTRONIC LEGAL MATERIAL' and 'CHAPTER 23' designation.

Added Governor approval line: 'Approved by Governor June 29, 2026. Filed with Secretary of State June 29, 2026.'

Page numbering and text reflowed throughout to match the chaptered publication layout (page numbers changed from SB 122 format to Ch. 23 format).