Is data processing taxable in California?
No. Data processing, compute and raw cloud infrastructure are not taxable in California, and S.B. 122 expressly leaves raw IaaS out when it starts taxing SaaS on 2027-01-01.
| Short answer | Not taxable |
|---|---|
| Effective date | Exempt today and after S.B. 122 takes effect on 2027-01-01, which excludes raw IaaS and cloud infrastructure. |
| Authority | S.B. 122 |
| Last reviewed | 2026-09-30 |
Why
California's sales tax reaches tangible personal property. Processing a customer's data or renting raw compute transfers no property, so it is not taxed today.
S.B. 122 changes the answer for SaaS and prewritten software from 2027-01-01, but its exclusions include raw IaaS and cloud infrastructure, custom software and digital assets. AgentTax keeps California compute and data processing exempt on both sides of that date.
Business vs. consumer buyers
Because California does not tax this category, buyer type does not change the answer.
Where the line is
- API products and remotely accessed software are inside S.B. 122 from 2027-01-01. A charge for running the seller's prewritten software is SaaS, not raw compute.
How AgentTax classifies data processing
Processing data the customer furnishes and returning the processed result: compute, transformation, analysis and API calls that operate on the buyer's own data. AgentTax routes compute work, API access and data processing to its data processing category.
Run a California sale through the AgentTax engine and get the amount, the rate it used and the statute behind it. No signup needed.
Open the calculatorFrequently asked questions
- Will cloud compute be taxable in California in 2027?
- Raw IaaS and cloud infrastructure are excluded from S.B. 122. SaaS and API access to prewritten software become taxable on 2027-01-01.
Related
- All California digital tax answers
- Is SaaS taxable in California? (full guide)
- Are information services taxable in California?
- Data processing: every state we cover
- Is data processing taxable in Connecticut?
- Is data processing taxable in Iowa?
- Is data processing taxable in Kansas?
- Is data processing taxable in Kentucky?
- Is data processing taxable in Louisiana?
- Is data processing taxable in Maryland?
Further reading on the AgentTax blog
- California Is Deleting the Sentence That Says Renting a Computer Is Not Taxable
- It's Law: Newsom Signs California's SaaS Sales Tax, and the January 1, 2027 Clock Starts Now
- Where Does an Agent 'Use' Software? California's SB 122 Sourcing Workshop and the Situs Problem for AI Agents
Sources
This page is for informational purposes only and is not tax, legal, or accounting advice. It reflects AgentTax's current interpretation of evolving law, which can change. Consult a qualified tax professional before making compliance decisions. Positions on this page come from the AgentTax tax policy registry (v1.24.0); see our methodology.