In California, the classification of Software as a Service (SaaS) as a service rather than tangible personal property generally exempts it from sales tax. SaaS is considered a service because it involves access to software hosted on remote servers rather than the sale of a physical product. However, if the software is delivered on physical media or bundled with tangible goods, it may be reclassified as tangible personal property, making it taxable. This classification impacts how businesses price and sell their SaaS offerings, as they must evaluate whether their delivery method or bundling practices subject them to sales tax. Proper classification ensures compliance with California’s tax regulations and avoids potential penalties for incorrect tax applications.