Preheat the oven to 350°F (175°C). Grease and line two 8-inch round cake pans with parchment paper.

In a medium bowl, whisk together the flour, baking powder, and salt.

In a large bowl, beat the butter and sugar together until light and fluffy, about 3 to 4 minutes.

Add the eggs one at a time, beating well after each addition, then mix in the vanilla extract.

Add the dry ingredients in three additions, alternating with the milk, beginning and ending with the dry ingredients. Mix just until combined.

Fold in the rainbow sprinkles gently to avoid overmixing and color bleeding.

Divide the batter evenly between the prepared pans and smooth the tops.

Bake for 25 to 30 minutes, or until a toothpick inserted into the center comes out clean.

Let the cakes cool in the pans for 10 minutes, then turn them out onto a wire rack to cool completely.

To make the frosting, beat the softened butter until creamy. Gradually add the powdered sugar, vanilla extract, salt, and enough milk to reach a smooth, spreadable consistency.

Place one cooled cake layer on a serving plate and spread frosting over the top. Add the second layer and frost the top and sides of the cake.

Decorate generously with additional rainbow sprinkles before serving.