California’s 2026–27 budget package has advanced materially since Gov. Gavin Newsom’s May Revision. The operative tax trailer bill, SB/AB 122, would extend California’s sales and use tax to digital prewritten software and Software-as-a-Service (SaaS), effective Jan. 1, 2027, and would revise the state’s business credit limitation rules. The budget bill passed the Assembly on June 15, and SB/AB 122 is expected to proceed to Senate concurrence on June 18 as part of a reported three-party agreement among the Assembly, Senate, and Governor.

Although the updated proposal softens the Governor’s original immediate permanent business credit cap, the core software and SaaS tax remains in the bill. Together, the measures would represent a significant expansion of California’s revenue base, with potentially meaningful procurement, compliance, and income tax planning consequences for businesses operating in California.

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Tags: California, GT Insight
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Photo of Nikki E. Dobay Nikki E. Dobay

Nikki Dobay serves as a co-chair of the U.S. State and Local Tax (SALT) practice and is nationally known for her deep experience and understanding of state tax policy and the legislative process. She also advises her clients on sophisticated multistate tax issues

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Nikki Dobay serves as a co-chair of the U.S. State and Local Tax (SALT) practice and is nationally known for her deep experience and understanding of state tax policy and the legislative process. She also advises her clients on sophisticated multistate tax issues as well as the consequences and planning opportunities related to corporate M&A transactions and oversees state and local tax controversy matters, ranging from audits to appellate litigation, and involving sales and use taxes, income and franchise taxes, property taxes, and constitutional issues.

Nikki regularly engages on key SALT issues impacting multijurisdictional taxpayers with national and statewide business and taxpayer associations, national tax administrator organizations, including the Federation of Tax Administrators (FTA), the Multistate Tax Commission (MTC) and Streamlined Sales Tax (SST), and state legislator organizations, including the National Conference of State Legislatures (NCSL), and the Institute for State Policy Leaders (ISPL). She is also a frequent speaker on a broad array of SALT issues at various conferences across the country, including Council On State Taxation (COST), Tax Executives Institute (TEI), ABA, NYU, Hartman, Deloitte SALT Symposium, and various other regional conferences.

Prior to returning to private practice, Nikki spent five years as senior tax counsel for the COST, a national trade association representing large multistate businesses. While at COST, Nikki focused on the 13 most western states (including Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon Utah, Washington and Wyoming), and has a strong working knowledge of the tax regimes in all of these states. Nikki’s time at COST as well as her continual work with state tax administrators through the FTA, MTC and SST have resulted in her having strong relationships with state tax administrators across the country.

Nikki’s broad experience and in-depth knowledge of tax regimes in Oregon, Washington, and Idaho inform her handling of litigation and strategic tax matters in these states. Over the past 20 years, Nikki has consistently worked with taxpayers to address complex state and local tax issues in Oregon, including corporate income excise tax disputes, residency issues, and local tax home rule challenges. She played a pivotal role in drafting Oregon’s Corporate Activity Tax legislation and has represented clients in the Oregon Tax Court on issues ranging from business/non-business income litigation to challenges involving Portland and Metro taxing authority.

In Washington, Nikki advises her clients on all aspects of B&O tax, including handling audits and litigation. She is also involved in efforts to consolidate and streamline B&O tax filing through legislative advocacy and coalition-building, as well as advising clients on sales tax and residency matters. Her work in Idaho includes drafting and successfully passing updated apportionment provisions, as well as advising on corporate tax matters and disputes and legislative initiatives.

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Photo of Bradley R. Marsh Bradley R. Marsh

Bradley R. Marsh is Co-Managing Shareholder of the San Francisco office and focuses his practice on tax controversy matters, including property, sales, payroll, business license, employment, franchise, parcel, district, documentary transfer, transient occupancy, utility user, income, parking, gift and estate taxes. He serves…

Bradley R. Marsh is Co-Managing Shareholder of the San Francisco office and focuses his practice on tax controversy matters, including property, sales, payroll, business license, employment, franchise, parcel, district, documentary transfer, transient occupancy, utility user, income, parking, gift and estate taxes. He serves as a co-chair of the State and Local Tax (SALT) Practice. Brad represents clients in audits, litigation and administrative hearings, as well as analyzing transactions and business models, and developing strategies for legislative resolutions.

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Photo of John Ormonde John Ormonde

John Ormonde advises clients on state and local tax controversy, planning, and policy matters. His practice covers all major state and local tax types, including corporate income tax, franchise tax, gross receipts tax, property tax, and sales and use taxes, with wide-ranging experience…

John Ormonde advises clients on state and local tax controversy, planning, and policy matters. His practice covers all major state and local tax types, including corporate income tax, franchise tax, gross receipts tax, property tax, and sales and use taxes, with wide-ranging experience in California state and local taxes. He works with Fortune 500 corporate taxpayers, partnerships, and high-net-worth individuals across the technology, financial, asset management, manufacturing, and retail industries.

John represents clients at every stage of a tax dispute, from the audit level through administrative appeals, trial courts, and courts of appeal. He also identifies state and local tax refund opportunities and handles the execution of refund claims. Before beginning his legal practice, John worked as a tax consultant in the California national practice group of a Big Four accounting firm, which gave him a practical grounding in the compliance and planning issues corporate taxpayers face day to day.

John is a frequent speaker on state and local tax topics, presenting at conferences and webinars hosted by organizations such as the Tax Executives Institute, California Tax Foundation, California Lawyers Association, and American Bar Association.

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Photo of Samantha Trencs Samantha Trencs

Samantha Trencs counsels clients on a wide range of state and local tax matters. Samantha’s practice focuses on tax planning, policy, and controversy in virtually all areas of state and local taxation, including income, franchise, sales and use, and property taxes. Her practice…

Samantha Trencs counsels clients on a wide range of state and local tax matters. Samantha’s practice focuses on tax planning, policy, and controversy in virtually all areas of state and local taxation, including income, franchise, sales and use, and property taxes. Her practice also includes advising on multistate audits and litigation matters.

Samantha has deep policy experience, including tracking and monitoring tax legislation and ballot measures to provide in-depth analysis on legislative developments and their impact on Fortune 100 companies. Samantha also has wide-ranging experience researching and analyzing complex sales and use tax issues, including regularly analyzing the applicability of state marketplace collection laws, sales tax holidays, and sales and use tax registration, as well as conducting fifty state taxability studies on key SALT issues.

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Photo of Alice Kessler Alice Kessler

Alice Kessler is the Co-Leader of the California Government Law & Policy Group in the firm’s Sacramento office. She is an accomplished legislative strategist and leader with a track record of rapid advancement grounded in proven strategic and communication talents, collaborative skills, and…

Alice Kessler is the Co-Leader of the California Government Law & Policy Group in the firm’s Sacramento office. She is an accomplished legislative strategist and leader with a track record of rapid advancement grounded in proven strategic and communication talents, collaborative skills, and trusted integrity. Alice has deep relationships with California policymakers, thought leaders, and community-based organizations. She leverages her well-honed skills to build consensus, gain buy-in, and motivate team members and partners.

Alice helped to launch the startup state advocacy practice at one of the largest public affairs consultancies on the West Coast, where she worked to advance the interests of technology firms, automakers, trade associations, and local government entities. As managing partner for one of the fastest growing lobbying firms in Sacramento, she oversaw all business operations and represented clients in the areas of energy, technology, health care, and education.

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