California sales tax will apply to OMTI subscriptions in 2027

California has changed its Sales & Use Tax regulations for 2027 to include digital products that are accessed remotely. This change will affect you whether your business is located in California or not. This article describes the changes, what OMTI will be required to do starting in January, and your responsibilities in regards to this new tax. While California has not finalized some of the details, the information here is based on what they have announced so far. If any details that affect our clients change, we will update this article.

Who & what is affected

Because the means of distribution of software has changed over the years, California has now changed its regulations to include software as a service (SaaS) and any other prewritten computer software accessed remotely. OMTI products fit this definition, and as a company headquartered in California we are obligated to collect this tax on all of our digital products used in California except:

1. Repository storage
2. Custom programming that is billed separately from your monthly subscriptions

If your business is located in California, we will collect both California state and local sales taxes on the eligible portion of your invoices. The local tax rate will be based on your company billing address that we use for your subscription. If that address is incorrect, please provide us with your updated address so we can apply the correct local tax rate.

If your business is located outside of California or you have locations both inside and outside of California, state law requires us to collect the tax unless you provide us with documentation and a signed declaration detailing any exemptions you claim. To make it easier, we have created forms you can use for this purpose.

If you use OMTI products and services exclusively outside of California:

Use our tax exemption form to declare your exemption from California sales taxes and provide supporting evidence. Submit the form to us before we invoice you for January 2027 so we do not charge sales tax on any billed products or services starting in 2027.

If you use OMTI products and services both inside and outside of California:

Use our Multiple Points of Use Certificate to declare how many of your Named User Licenses are exempt from California sales tax because they are used exclusively outside of the state. We will use the information you provide on the certificate to calculate your sales tax liability and adjust the sales tax on any billed products or services starting the first of the month after we receive your form so be sure to submit it to use before we invoice you for January.

Important

If you claim any exemptions to California sales tax, it is your obligation to maintain records to document your eligibility for these declared exemptions. It is also your responsibility to submit to us updated certificates when your status changes, e.g. you increase or decrease the number of Named User Licenses you subscribe to that changes your tax liability. We will adjust the tax we collect in the next invoice billed to your account.

Frequently Asked Questions

Will this affect my invoice?

If your OMTI products or services are classified as a digital product under this law and you’re located in California, yes — California sales and use taxes will generally apply beginning with invoices dated January 1, 2027. We’ll handle the calculation and collection on our end; you won’t need to do anything differently when receiving an invoice. OMTI products and services that fall under this classification include RB9, MR9, MR8, and all of their plug-ins.

Does this apply to everyone?

Not necessarily. Several categories are exempt or excluded, including:

• Subscriptions purchased and used solely outside California¹
• Repository storage
• Custom software built specifically for your organization that you are invoiced for separately from your subscription²
• Consulting services and custom training programs

1. If your use of OMTI products and services is outside of California — either wholly or in part — you must complete and submit our exemption or MPU forms before January 1, 2027 to claim any exemption from California sales tax. You are also responsible for keeping us informed of any changes in your tax exemption by filing updated forms with OMTI.
2. If your engagement with OMTI is primarily custom development work, it’s worth a conversation with your account contact to confirm how your services are classified.

Who is responsible for collecting and paying the tax?

In almost all cases, OMTI will collect the tax as part of your invoice and remit it to the state, just as any retailer would. There is one narrow exception: if a client’s cumulative purchases of electronically delivered or remotely accessed digital products from OMTI exceed $5 million within a calendar year, responsibility for reporting and paying the tax can shift to the purchaser directly. This threshold affects very few accounts, and if it applies to yours, we will reach out individually well before it becomes relevant with guidance for handling the sales tax remittance.

Why is this happening?

This is a statewide policy change, not an OMTI decision. California’s Department of Tax and Fee Administration (CDTFA) has updated the legal definition of taxable property to catch up with how software is actually delivered and consumed today — electronically and remotely, rather than solely on physical media.

What do I need to do right now?

Nothing yet. If you believe you are entitled to a full or partial exemption from California sales taxes you can fill out one of our exemption or MPU forms before we invoice you for January 2027. As the effective date approaches, we’ll follow up directly if anything about your specific account requires action or documentation on your end.

Where can I learn more?

The full CDTFA Special Notice (L-1036) is publicly available at cdtfa.ca.gov, under the Tax Guide for Retailers and Purchasers of Digital Products. Of course, you’re always welcome to reach out to your OMTI Client Services contact directly — we’ll be happy to explain what this means for your account specifically.