California Governor Gavin Newsom proposed a tax on digital prewritten software downloads which will take effect January 1, 2027. The measure is expected to generate $450 million for the state’s general fund and $1.1 billion in local revenues. Major providers such as Microsoft will be required to collect sales tax on online software sales.

The UK Competition and Markets Authority has opened a nine-month Strategic Market Status investigation into Microsoft’s business software ecosystem. The probe will examine bundling practices, interoperability constraints, default settings and AI integration across productivity, operating systems, database and security products. It will assess whether Microsoft’s position across more than 15 million commercial users hinders competition and customer choice.

The proposed tax could tighten margins on digital software sales and prompt Microsoft to adjust pricing or packaging in California. The CMA investigation risks regulatory interventions that may force changes to bundling or interoperability, potentially affecting product integration and revenue streams in the UK. Together these actions could weigh on Microsoft’s growth projections in key markets.