California healthcare organizations already face significant pressure to control operating expenses while investing in the technology needed to improve patient access, workforce efficiency and service quality. Beginning January 1, 2027, a new California tax law will add another cost consideration to many technology purchases.

California Senate Bill 122—commonly known as SB 122—expands the state’s sales and use tax to include prewritten computer software delivered electronically or accessed remotely. That means many Software-as-a-Service (SaaS) subscriptions that historically were not taxable in California will become taxable.

The financial difference is straightforward:

Whether a healthcare organization purchases call center technology outright or subscribes to it through a SaaS agreement, SB 122 means you should expect to pay more once the tax takes effect. However, we own, develop and operate our call center technology instead of selling or licensing it to clients. This eliminates separate software purchase or subscription costs—and the related SB 122 technology tax costs—and AHC passes those savings along to our clients.

For hospitals, health systems, physician groups, imaging centers and other healthcare organizations that depend on multiple cloud-based platforms, the cumulative financial impact could be substantial.

What Is California SB 122?

Governor Gavin Newsom signed SB 122 into law on June 29, 2026. Effective January 1, 2027, California will generally treat prewritten software as taxable regardless of whether it is:

                Purchased on physical media

                Downloaded electronically

                Accessed remotely through a SaaS subscription

Custom software developed for the specific requirements of one customer may remain exempt, along with certain other digital products and services. However, healthcare organizations should not assume that customization, bundling or inclusion within a broader agreement automatically makes software nontaxable. Each purchase and contract should be evaluated individually.

The statewide California sales and use tax rate is currently 7.25%. According to the California Department of Tax and Fee Administration, district taxes can increase the total rate based on where a product is sold or used.

For a healthcare organization spending $1 million annually on taxable SaaS products, the statewide tax alone would add $72,500 per year. Applicable district taxes could push the total expense even higher.

Why SB 122 Could Have a Greater Impact Than Expected on Healthcare Organizations

The new tax is not limited to major enterprise applications. A healthcare call center or patient communications operation may use separate platforms for:

• Telephony and interactive voice response
• Workforce management and scheduling
• Call recording and quality assurance
• Analytics and performance reporting
• Artificial intelligence and agent assistance
• Patient outreach and appointment reminders
• Customer relationship management
• Security and compliance monitoring

When these capabilities are purchased from multiple vendors, an organization can accumulate multiple separately billed—and potentially taxable—technology expenses.

This makes it important to evaluate the complete operating cost of every platform. Subscription price alone does not represent the true cost.

Healthcare organizations should also calculate implementation charges, system integrations, customization, maintenance, support, upgrades, internal administration, IT oversight and applicable state and district taxes. Vendor management and the staff time required to keep numerous connected systems working properly also create real costs, even when they do not appear on a software invoice.

Start Evaluating Healthcare Technology Costs Now

Waiting until late 2026 to review existing technology contracts could limit an organization’s options. Healthcare leaders should begin identifying potentially affected software now and determine:

• Which applications are prewritten software or remotely accessed SaaS.
• How much the organization pays each vendor annually.
• Which implementation, support and integration charges may be taxable.
• Which California location or locations determine the applicable tax rate.
• When current agreements renew or allow renegotiation.
• Whether redundant or underused platforms can be consolidated.
• Whether an outsourced call center alternative could provide greater combined value.

Organizations should work with qualified tax and legal advisors to determine how SB 122 applies to specific contracts. Additional regulatory guidance may also be issued before the law takes effect.

Compare Standalone Technology With an Outsourced Call Center Model

SB 122 provides another reason to compare separately purchased or subscribed call center technology with a comprehensive outsourced call center model.

AHC is not a software vendor or a managed-services technology provider. It is an outsourced healthcare call center. Clients purchase call center services—not access to standalone software—while AHC owns, develops, maintains and operates the technology required to deliver those services.

With a standalone approach, the healthcare organization purchases software outright or subscribes to it as SaaS, manages vendors, coordinates integrations, handles upgrades and supplies the employees and management required to operate the technology. Each additional platform can introduce another license or subscription, implementation process, support agreement, administrative responsibility and potentially taxable technology expense.

American Health Connection (AHC), the nation’s oldest and largest healthcare call center, offers this outsourced alternative. AHC combines experienced U.S.-based healthcare call center agents, operational management and advanced technology within a comprehensive service model. Its capabilities include AI-supported workforce management, analytics, quality monitoring, call recording and integration support.

As explained in Healthcare Call Center Technology That Cuts Costs, AHC’s model can eliminate major capital expenditures, separate upgrade expenses and much of the internal burden associated with managing a complex call center technology stack.

The value extends beyond software access. AHC helps healthcare organizations improve performance, reduce abandonment, increase first-contact resolution and strengthen the patient experience. Its healthcare call center solutions are designed to combine technology with trained personnel, management, quality assurance and operational support.

The tax treatment of each contract should be reviewed by a qualified advisor. The operational and financial distinction is clear: AHC clients purchase outsourced call center services rather than separately purchasing or subscribing to the technology needed to provide them.

Look Beyond the Subscription Price

California SB 122 should encourage healthcare leaders to reconsider how technology investments are evaluated. The lowest advertised subscription price does not necessarily produce the lowest total operating cost.

Before renewing, purchasing or subscribing to call center technology, compare the full cost of standalone software or SaaS with a comprehensive outsourced call center alternative. Include taxes, integrations, upgrades, support, internal administration, staffing and management—not just license or subscription fees.

Whether an organization buys call center technology or subscribes to it as SaaS, SB 122 will increase its total cost. AHC clients do neither. AHC owns and operates the technology as part of its outsourced call center services, eliminating separate technology and related SB 122 tax costs and passing those savings along to clients.

Learn More About SB 122 and Avoiding Technology Cost Increases

Healthcare organizations looking to simplify operations and improve cost predictability can learn more about American Health Connection or schedule a conversation with AHC.

This article provides general information and should not be considered tax or legal advice. Organizations should consult qualified advisors regarding the application of SB 122 to their specific purchases and agreements.