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TaxBuzz Top 5 - Newsom Pushes New Digital Software Tax, Trump Floats Gas Tax Suspension & More

by
Rebekah Barton
on
5/15/2026
TaxBuzz Top 5 - Newsom Pushes New Digital Software Tax, Trump Floats Gas Tax Suspension & More

Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.

We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.

1. California Pushes New Tax on Digital Software and SaaS Products

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Credit: Justin Sullivan/Getty Images

California Gov. Gavin Newsom is proposing a major expansion of the state’s sales tax system that would apply taxes to digitally delivered software and many software-as-a-service (SaaS) products for the first time, potentially creating billions in new revenue for the state.

The proposal was unveiled as part of Newsom’s revised 2026-2027 state budget plan. Under the measure, California would begin applying its sales tax to “prewritten” digital software purchases, including cloud-based and downloadable software products that currently avoid taxation in many situations. The change would need approval from the Democrat-controlled state legislature before taking effect on January 1, 2027.

Newsom argued the current system unfairly treats physical and digital purchases differently. During a press conference, he pointed out that Californians buying boxed software in stores already pay the state’s 7.25% sales tax, while many consumers and businesses purchasing software online do not.

The proposal could significantly impact major technology and enterprise software companies with large California customer bases, including Microsoft, Salesforce, and Oracle. Analysts say the costs could eventually be passed along to businesses through higher subscription prices or adjusted pricing models.

According to Newsom’s office, the tax could generate roughly $450 million for California’s general fund during the first budget year and approximately $900 million annually afterward. When combined with local tax revenue, the total projected impact could exceed $2 billion annually in future years.

The proposal arrives during a volatile moment for the software industry. SaaS companies have faced significant market pressure in recent months amid investor concerns that AI-powered automation tools could reduce demand for certain traditional software products and services. Business Insider described the recent downturn as part of a broader “SaaSpocalypse” selloff affecting many cloud software firms.

2. New York Considers New Tax on $1 Million Cash Home Purchases

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Credit: Alexander Spatari/Getty Images

Just over a week after reaching a tentative budget agreement that includes a new 'Tax the Rich' stipulation targeting luxury second homes in New York City, lawmakers are reportedly negotiating yet another new real estate tax aimed at high-end property transactions, this time targeting all-cash home purchases worth more than $1 million.

According to Bloomberg, the proposal under discussion would apply to New York City residential properties purchased entirely with cash for at least $1 million. Lawmakers are also considering expanding the tax statewide to include cash purchases in suburban and upstate markets.  The measure is expected to become part of New York’s broader state budget negotiations as officials continue searching for additional revenue sources to help address New York City’s growing budget pressures. Bloomberg reported the New York City version alone could raise approximately $160 million annually.

Details about the exact tax rate have not yet been finalized publicly, but reports indicate the surcharge would specifically target buyers who do not finance their purchases through traditional mortgages. Policymakers appear to be focusing on cash transactions because they are often associated with luxury real estate purchases and wealthier buyers.

Supporters argue the cash-purchase tax would primarily impact affluent buyers and investors rather than middle-class homeowners. They also contend that luxury real estate transactions provide an opportunity for New York to generate additional revenue without broadly increasing income taxes on residents. Critics, however, warn the proposal could further weaken New York’s already fragile luxury real estate market and encourage more high-net-worth individuals to relocate investments to lower-tax states like Florida or Texas. Real estate groups have increasingly argued that New York’s growing list of targeted housing taxes creates uncertainty for both developers and buyers.

3. Trump Floats Federal Gas Tax Suspension as Iran Conflict Pushes Fuel Prices Higher

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Credit: Samuel Corum/Getty Images

President Donald Trump says he wants to temporarily suspend the federal gasoline tax as Americans continue facing rising fuel prices tied to the ongoing conflict involving Iran and disruptions in global oil markets. In a phone interview with CBS News, Trump said he supports suspending the federal gas tax “for a period of time” to help offset the sharp increase in gasoline prices that has unfolded during the Iran conflict. Later, when asked how long the suspension would last, Trump responded: “Till it’s appropriate.”

The federal gasoline tax currently stands at 18.4 cents per gallon and primarily funds highway and transportation infrastructure projects through the federal Highway Trust Fund. Suspending the tax would likely require congressional approval.

Gas prices have climbed significantly since tensions escalated in the Middle East earlier this year. According to reports cited by CBS News and other outlets, the national average price for gasoline has risen above $4.50 per gallon, with some states surpassing $5 per gallon as oil markets react to instability surrounding the Strait of Hormuz — one of the world’s most critical oil shipping routes.

The administration has linked much of the increase to the ongoing Iran war and disruptions to global energy supplies. Trump has continued pushing Iran to agree to new negotiations while warning that military tensions could escalate further if diplomatic talks fail.  Several states have already implemented their own gas tax holidays in response to rising fuel costs. Indiana recently suspended both its gasoline sales tax and excise tax, while other states including Georgia and Utah have adopted temporary relief measures as well.

Supporters of suspending the federal gas tax argue the move could provide immediate relief for consumers ahead of the busy summer travel season. However, critics note that federal gas tax holidays often provide only modest short-term savings while reducing funding available for road repairs and infrastructure projects. Some economists have also argued that energy companies do not always pass the full savings directly on to consumers.

4. Missouri, Other Republican-Led States Push to Eliminate Income Taxes as Economic Divide Between States Deepens

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Credit: John Elk III/GettyImages

Republican lawmakers across several states are accelerating efforts to slash or completely eliminate state income taxes, setting up a growing economic and political divide between conservative and liberal states over how governments should fund public services.

A major focal point of the movement is Missouri, where Republican leaders are pursuing a constitutional amendment that could eventually phase out the state’s personal income tax entirely. Gov. Mike Kehoe has made income tax elimination one of his top priorities, arguing the move would make Missouri more competitive with no-income-tax states like Florida and Texas.

Supporters say eliminating income taxes allows workers and businesses to keep more of their earnings, encourages economic growth, and attracts new residents and investment. Republican leaders in states including South Carolina, Georgia, Mississippi, and Oklahoma are pursuing similar strategies, often framing them as part of a broader effort to modernize tax systems and compete for population growth.

Missouri Republicans have already spent years lowering the state’s top income tax rate, reducing it from 6% to roughly 4.7%. The state also recently became the first in the nation to eliminate taxes on capital gains income.

But, critics warn the long-term consequences could be severe.

Opponents argue that eliminating income taxes often forces states to rely more heavily on sales taxes and consumption-based taxes, which tend to place a larger burden on lower- and middle-income households. Education advocates and policy analysts have warned the plans could lead to major funding shortfalls for schools, healthcare systems, infrastructure, and other public services.

Much of the criticism centers on comparisons to Kansas’ deeply controversial tax-cut experiment under former Gov. Sam Brownback during the 2010s. Kansas dramatically reduced income taxes with promises of economic growth, but the state later faced large budget deficits, school funding crises, and bipartisan backlash before portions of the cuts were eventually reversed.

5. Texas Attorney General Blocks More Than 130 Cities From Raising Property Taxes

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Credit: Donovan Reese/Getty Images

Texas Attorney General Ken Paxton announced this week that more than 130 Texas cities are now prohibited from raising property taxes after allegedly failing to comply with new state audit and financial transparency requirements.

The crackdown stems from Senate Bill 1851, a law passed during the 2025 legislative session as part of Texas Republicans’ broader push to limit property tax growth statewide. The law bars cities from adopting property tax rates above the “no-new-revenue” rate if they fail to complete annual financial audits and publicly file financial statements within required deadlines.

According to Paxton’s office, the investigation initially reviewed more than 1,000 Texas municipalities. So far, officials say at least 130 cities have been found noncompliant, including communities ranging from small rural towns to larger cities such as Big Spring, Victoria, Texas City, Seabrook, and Wimberley.

“I will not allow cities to unlawfully raise taxes on hardworking Texans,” Paxton said in a statement announcing the enforcement action.

Under the law, cities that fail to comply cannot increase property tax collections beyond what would generate the same revenue as the previous year on existing properties. The restriction remains in place until the city completes and files the required audits.

The move represents one of the most aggressive state-level interventions into local government finances in recent Texas history. State Republicans have increasingly focused on property tax relief as a major political priority, arguing homeowners continue facing unsustainable tax burdens despite repeated legislative relief packages.

Critics, however, warn the enforcement campaign could create major financial strain for smaller communities already struggling with staffing shortages and limited accounting resources. Some local officials argue the audit deadlines are difficult for smaller municipalities to meet, particularly when outside auditing firms are in short supply.

The tension has already produced conflicts between local governments and the attorney general’s office. Earlier this month, officials in Odessa argued Paxton’s demands were legally impossible to implement retroactively after the city had already approved its tax rate. Odessa Mayor Cal Hendrick said there was “no mechanism” available for the city to reverse the increase after the fact.

Which headline this week most interests you?

Feature Image Credit: Brandon Bell/Getty Images

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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