Ernst & Young's State and Local Tax Weekly newsletter for February 7 and February 14 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation.

Weekly Indirect Tax Report February 07 and February 14, 2025

TOP STORIES

Ohio enacts changes to its marketplace facilitator provisions, sales tax exemptions for professional sports facilities, and CAT sourcing rules

On January 2, 2025, Ohio Governor Mike DeWine signed Am. Sub. House Bill 315 (HB 315), which while primarily a measure to revise township laws, included tax-related provisions affecting Ohio's sales and use tax and Commercial Activity Tax (CAT).

Ohio sales and use tax change — network delivery services: HB 315 amends ORC 5741.01(Q)'s definition of a "marketplace facilitator" to include a person who owns, operates, or controls a physical or electronic marketplace through which delivery network services are facilitated on behalf of marketplace sellers. HB 315 adds new ORC 5739.01(XXX)(3) to define "network delivery services" to include both of the following when performed as part of a single transaction: (1) pickup of a local product by a delivery network courier¹ from a local merchant² that is not under common control of the delivery network company, and (2) delivery by the network delivery courier of that local product to a location designated by the consumer that is not more than 75 miles from the local merchant's place of business where the pickup of the local product occurs.

ORC 5741.01(E) provides that a marketplace facilitator is treated as a seller of taxable goods sold by marketplace sellers through the marketplace facilitator.

HB 315 adds ORC 5741.072, which allows a delivery network company that facilitates network delivery services to request, from the Ohio Department of Taxation (Department) on a form to be specified, a waiver³ from the requirement to be treated as the seller of the goods sold by the marketplace seller through the marketplace facilitator. The wavier, if granted, does not affect the delivery network company's status as a seller of its network delivery services, which are taxable under HB 315; it only waives the requirement to collect tax on the local products delivered. See new ORC 5739.01(B)(13). There is no specified effective date for these provisions in the uncodified law, so it appears these provisions are effective on April 3, 2025, the effective date of HB 315.

Sales tax exemption for professional sports facilities: Ohio law historically exempts from sales and use tax building and construction materials incorporated into the original construction of certain professional sports facilities. HB 315 expands this exemption to include all tangible personal property and construction materials incorporated into any construction (not just the original construction) of the professional sports facility. HB 315 also provides that a person who leases a county-owned professional sports facility may sign an exemption certificate on behalf of the county. This change applies for tax periods beginning on or after May 1, 2025.⁴

CAT sourcing rule change: HB 315 also amends ORC 5751.033 by adding new subsection (M), which sources gross receipts from the sale or lease of a motor vehicle to Ohio if the vehicle is issued a certificate of title showing the owner's or lessee's address in Ohio. This change appears to be in response to the Ohio Board of Tax Appeal's (BTA) recent decision in Straub Nissan LLC v. Harris, Ohio BTA No. 2022-422 (October 23, 2024), in which the BTA held that sales of motor vehicles by a West Virginia dealership were not sourced to Ohio when purchased by an Ohio resident who subsequently brought the vehicles into Ohio. ORC 5751.033(E) sources gross receipts from the sale of tangible personal property to Ohio if the property is received in Ohio by the purchaser. The BTA concluded that since the taxpayer received the vehicle in West Virginia the analysis stopped there. While the statute sources the sale of tangible personal property delivered by motor carrier or other means of transportation to the place where the property is ultimately received after all transportation has been completed, the BTA found it did not apply since the purchase and delivery occurred in West Virginia. This change is effective for tax periods beginning before, on, or after the effective date of HB 315, which is April 3, 2025.⁵

For additional information on this alert, see Tax Alert 2025-0419.

GOVERNOR BUDGETS

The following is a summary of governors' budget proposals and state-of-the state addresses.

Alabama: Governor Kay Ivy on February 4, 2025 presented her 2025 State-of-the-State address. While the governor did not mention any tax changes, she did call for the "support [of] our economy and high-wage jobs … [and] ensure more money stays in our taxpayers' pockets."

Alaska: On January 28, 2025, Governor Mike Dunleavy gave his State of the State address. The governor did not mention taxes, but said that he sees "opportunities to monetize carbon through carbon capture and nature-based offsets creating new revenues for the State of Alaska."

Connecticut: On February 5, 2025, Governor Ned Lamont presented his Fiscal Year 2026-27 Biennial Budget. The governor's budget would increase the property tax credit to $350 and it would increase total aid to municipalities by $230 million over the biennium. The governor noted that the state will work with certain universities and make $100 million in capital investments in quantum computing and AI "to keep our key industries ahead of the curve, including life sciences and fintech." The budget also would increase the biotech R&D credit to 90% (from 65%), and it would accelerate the elimination of the capital base tax by two years. Additional tax changes mentioned in the detailed budget proposal would for combined reporting purposes eliminate the $2.5 million cap on any change in liability between the prior reporting system and the adoption of unitary combined reporting. Regarding net operating losses (NOLs), the budget would eliminate a special tax preference that allow taxpayers with existing prior year losses exceeding $6 billion to fully deduct such losses. The 10% corporate surcharge, which is in place through 2025, would be extended for an additional three years through 2028. The budget would reduce the top film production tax credit rate to 25% (from 30%) of qualifying expenditures.

Florida: On February 3, 2025, Governor Ron DeSantis presented his 2025-26 budget. The governor's budget includes $2.2 billion in tax relief. The budget would repeal over two years the business rent tax (i.e., repeal the state's sales tax on commercial real estate leases), with a 1% reduction on January 1, 2026 and a further 1% reduction on January 1, 2027. The budget also would create a new venture tax credit program of $100 million for investments in new ventures focused on research, innovation, science and engineering. The sales tax exemption for data center equipment would be made permanent by repealing the exemption's sunset date. The budget would exempt for one-year the intangibles tax for the first $500,000 of residential mortgages for the purchase of a primary residences. Time-limited tax holidays would be provided for outdoor recreation purchases for camping and fishing (i.e., the "freedom month" sales tax holiday), back-to-school, disaster preparedness, and tool time. The budget also would create a two-month marine fuel tax holiday and it would delay for two-years the imposition of natural gas fuel taxes that would go into effect on January 1, 2026.

Maryland: On February 6, 2025, Governor Wes Moore delivered his 2025 State-of-the-State address. During this address, the governor said that he is "reforming the tax code." The governor said that he will not raise sales or property taxes, but instead will close "corporate tax loopholes to lower the corporate tax rate to make Maryland more business friendly." The governor said that under his plan (two-thirds of Marylanders will receive a tax cut."

Michigan: On February 5, 2025, Governor Gretchen Whitmer presented her FY26 executive budget recommendations. Tax related provisions in the budget would continue the working families tax credit, rollback taxes on retirement income, tax vaping and non-tobacco nicotine products similar to other tobacco products. The proposed budget includes $54.8 million for the Going Pro job grants, which are available to business that support training employees in high-demand, skilled trade industries.

On February 10, 2025, the governor presented her "Mi Road Ahead" plan, which calls for significant tax changes to help fix local roads. The governor's plan would require "corporations pay their fair share," adopt a digital service tax, and impose a wholesale tax on the marijuana industry.

Mississippi: On January 29, 2025, Governor Tate Reeves gave his State of the State address. The governor said the "single best thing we can do for our state and her people is to eliminate our state's income tax," noting that the state is competing against other states without an individual income tax such as Florida, Tennessee and Texas.

Missouri: On January 28, 2025, Missouri's Governor, Mike Kehoe, presented his State of the State address, which outlined his FY26 budget and legislative priorities. One of his priorities is reducing taxes and cutting regulations. To that end, the governor said that "he directed the Missouri Department of Revenue to work with his staff on a sustainable and comprehensive plan to eliminate the individual income tax once and for all." The governor also supports the creation of a state version of DOGE.

Ohio: Governor Mike DeWine on February 3, 2025, introduced his 2026-27 executive budget. Tax related provisions in the governor's budget would provide a refundable child tax credit, increase the historic preservation tax credit annual cap, and increase the tax rates for cigarettes and other tobacco products. The governor also is proposing to double the tax imposed on sports betting.

Oklahoma: On February 3, 2025, Governor Kevin Stitt delivered his 2025 State of the State address. And he released his FY 2026 budget. The governor said his priorities including "making our state the best in the nation for business." The governor noted that neither Florida nor Texas has an individual income tax, and surrounding states, such as Nebraska, Missouri, Arkansas, Colorado and Louisiana, are cutting their income taxes and have lower rates. To keep the state from being considered a high tax state, the governor is calling for a half point cut to the individual and business income taxes that would take effect in 2026, with a path to a zero-income tax. The governor's budget proposal would direct the Oklahoma Tax Commission to administer a tax amnesty program. The governor also launched DOGE-OK "to keep the focus on flat budgets and limited government."

Pennsylvania: On February 4, 2025, Governor Josh Shapiro presented his FY 2025-26 budget. The governor said he directed the Department of General Services to conduct a review of every space owned or leased by the Commonwealth, noting that the state needs "more technology, more hoteling space, and more areas for collaboration" and to use the buildings it owns as effectively as possible. Regarding taxes, the governor is proposing to accelerate by two years the Corporate Net Income Tax (CNIT) rate cuts, adopt mandatory combined reporting, eliminate the three separate bank taxes and instead subject banks and financial institutions to the CNIT, tax and regulate skill games by treating such games like other video gaming terminals, and tax and regulate adult-use cannabis. The governor's budget also supports investment in "five pillars of opportunity" — energy, agriculture, manufacturing, robotics and technology, and life sciences.

South Carolina: On January 29, 2025, Governor Henry McMaster presented his 2025 State of the State address. The governor noted the state's $1.8 billion budget surplus, and said the top three leading industry investments in 2024 were from information technology, automotive and aerospace and aviation. The governor once again is proposing to accelerate individual income tax rate reductions. As originally enacted, the rate was scheduled to reduce from 7% to 6% over a five-year period. The governor's proposed reduction would reduce the current 6.2% rate to 6% this year. The governor also said that "we should not stop at 6%. We should keep cutting as much and as fast as we can until we can eliminate the personal income tax altogether."

South Dakota: Governor Larry Rhoden in a January 28, 2025 address to the Joint Legislative Session said that the state is in a "tough budget situation." He also said that he would not be offering a separate budget proposal from the one presented by former Governor Noem. Governor Rhoden noted that property taxes will be discussed this year.

Tennessee: On February 10, 2025, Governor Bill Lee presented his 2025 State of the State address, budget and legislative priorities. Proposed tax changes would provide $30 million to fund the Rural and Workforce Housing Tax Credit (the budget also calls for a joint resolution to fully enact the credit, an administrative action required by the tax credit legislation enacted in 2024). The governor's proposal also would provide additional aid for certain grant and funding programs, including the Rural Development Grant Fund, FastTrack grants, the Rural Grant Opportunity Fund, the RevV Program (which partners Tennessee research institutions with private businesses to foster research and development and job creation), the Small Business Innovation Research and Small Business Technology Transfer Matching Funds, the Nuclear Energy Fund, and the Small Modular Reactor Grant Fund. The governor also would invest $35.6 million in the state's rainy-day fund, which would bring fund's total to approximately $2.2 billion.

Texas: On February 2, 2025, Governor Greg Abbott delivered his 2025 State of the State address. The governor said that he "want[s] at least $10 billion in new property tax relief" and that local taxing authorities should only be allowed to raise property if such increase is approved by two-thirds of the voters. The governor also proposed to increase the business personal property tax exemption to $100,000. The governor declared property tax relief an emergency item "that must be passed." To making housing more affordable, the governor has proposed a one-year tax exemption on home improvements, listing heating and air conditioning as examples.

Vermont: On January 28, 2025, Governor Phil Scott delivered his FY 2026 budget address. Tax related provisions in the governor's budget include increasing the Downtown and Village Center Tax Credits to $5 million annually, providing an additional $2 million for cleaning-up brownfields, expanding the Tax Increment Financing program, increasing eligibility for the state's social security income tax exemption, expanding the earned income tax credit for those without dependents, and eliminating the income tax on military pensions. The governor also wants to revisit the state's climate superfund bill stating that "it is already costing taxpayers money as we defend the first of what could be many lawsuits."

West Virginia: On February 12, 2025, Governor Patrick Morrisey delivered his 2025 State of the State address. The governor announced the establishment of the West Virginia POWER Tech Center "to help West Virginia become the most innovative, aggressive supplier of energy to the growing technology industry." The governor said the state "will adopt regulatory and tax policies that make West Virginia the most dynamic and friendly state in the country for data, super intelligence, and cryptocurrency facilities." The governor discussed the state's financial challenges, saying that the hallmark of his administration will be "fiscal responsibility." The governor also said he wants West Virginia to have the lowest income tax of its neighboring states, noting that lowering taxes will make the state a more attractive place to live, work and do business.

INCOME/FRANCHISE

Indiana: A recent letter ruling issued by the Indiana Department of Revenue (IN DOR) discusses treaty protected income. The taxpayer is a foreign-domiciled corporation and is a partner in a domestic partnership with which it engages in a toll manufacturing arrangement (i.e., the domestic partnership (the toll manufacturer) performs manufacturing activity but does not take title to inventory during production). After the manufacturing process in completed, the taxpayer sells the finished goods to the toll manufacturer, who then sells the finished goods to customers throughout the US. The IN DOR found that while a treaty protects the taxpayer's income from US income tax, the taxpayer's income derived from the toll manufacturer is not similarly protected. Because application of the treaty results in the taxpayer excluding its profit/loss from its finished goods sales on its federal corporate income tax return, such profit/loss is likewise excluded from the taxpayer's Indiana adjusted gross income (AGI). Taxpayer, however, is required to include income from its ownership in the toll manufacturer in both its federal taxable income and its Indiana AGI. The IN DOR noted that the taxpayer may not include any of its own receipts, such as those from its finished goods sales, in its apportionment factors but must include its share of toll manufacturer's receipts in its apportionment factor. Ind. Dept. of Rev., Revenue Ruling # 2024-02CCP (January 3, 2025).

Kentucky: New law (HB 1) reduces the state's individual income tax rate from 4.0% to 3.5%, effective January 1, 2026. Starting in 2027 and thereafter, the legislature may further reduce the income tax rate to zero if revenue conditions for the fiscal year are met. Ky. Laws 2025, ch. 1 (HB 1), signed by the governor on February 6, 2025.

Virginia: A taxpayer was permitted to make an election to apportion its income using the manufacturer's modified apportionment method on its timely filed 2015 amended corporate income tax return. The Virginia Department of Taxation had denied the election because it was not made on the taxpayer's original return. Judicial rulings, however, have held that an otherwise eligible taxpayer could elect to use this apportionment method on an amended return. The Commissioner further found that because the taxpayer submitted data showing that it otherwise met the requirements to make the election in 2015 and that if it had done so it would have met the employment and wage requirements, it was entitled to a refund of corporate income tax paid for the tax year ending December 31, 2015. Va. Dept. of Taxn., Ruling of the Comm'r No. 24-128 (Dec. 11, 2024).

SALES & USE

Illinois: The Illinois Department of Revenue (IL DOR) proposed amendments to the Illinois Retailers' Occupation Tax (ROT) rules 86 Ill. Adm. Code 130.225, 130.530, 130.175 and 130.2075, to implement a statutory change that deems a retailer maintaining a place of business in Illinois and making retail sales of tangible personal property to Illinois customers from a location outside Illinois to be engaged in selling at retail in Illinois for ROT purposes. Starting January 1, 2025, retailers would have to use Form ST-2 to report such sales, listing the Illinois location where the tangible personal property was shipped or delivered or where the purchaser took possession (i.e., destination sourcing). Pursuant to Rule 130.175, the IL DOR provides registered taxpayers that sell tangible personal property from more than one location (e.g., a chain store) a sub-certificate of registration for each additional place of business. Under the proposed amendment, the sub-certificate of registration provisions would not apply to the out-of-state locations of retailers maintaining a place of business in Illinois who must file using the destination sourcing for sales to Illinois customers from outside the state. Proposed amendments would make clear that use tax continues to apply to tangible personal property purchased outside the state by an Illinois or out-of-state construction contractor or builder in such a way that the seller does not incur ROT and such property is used in Illinois for building purposes. The proposed rule includes examples of when ROT liability would not be incurred, such as when a builder purchases property from a remote retailer and the property was shipped to the builder in Illinois. Lastly, proposed amendments would provide that when a purchaser buys tangible personal property from an out-of-state retailer that maintains a place of business in Illinois, the out-of-state retailer should remit applicable state and local ROT unless the purchaser is also a retailer and elects to assume responsibility for such tax.

The IL DOR has also proposed amendments to the Leveling the Playing Field for Illinois Retail Act rules 86 Ill. Adm. Code 131.105, 131.107, 131.110, 131.150, and 131.155, to implement a statutory change that changed the tax obligations for retailers maintaining a place of business in Illinois and making sales to Illinois customers from outside the state. The proposed changes reflect that on and after January 1, 2025 such retailers incur destination-based ROT on sales they make outside Illinois and ship or deliver to Illinois purchasers. Sellers that maintain a place of business in Illinois with a physical presence in the state incur state and local ROT using origin sourcing for sales for which the selling activities occur in Illinois. If the seller also makes sales over a marketplace, they would also be considered a marketplace seller and the marketplace facilitator. If they have met the remittance threshold, they would incur state and local ROT liability based on destination sourcing. If seller has not met the remittance threshold and it does not have a physical presence in Illinois it would not incur state or local ROT on sales made outside Illinois that are shipped or delivered to Illinois purchasers. The remote retailer, nevertheless, would be allowed to register with the IL DOR as a voluntary use tax collector. The proposed amendments would add new and update several examples to reflect the statutory changes.

The IL DOR proposed amendments to the Use Tax rules 86 Ill. Adm. Code 150.801, 150.802 and 150.1305. The proposed changes reflect that on and after January 1, 2025, retailers maintaining a place of business in Illinois making retail sales to Illinois customers must register under the ROT and incur state and local ROT on all retail sales to Illinois customers, including retail sales from locations outside the state. The proposed amendments would provide that every retailer maintaining a place of business in Illinois would continue to act as Use Tax collector for the state and include examples of when a retailer would be required to collect and remit Use Tax while also incurring state and local ROT liability on a transaction.

Lastly, the IL DOR proposed amendments to the Home Rule Municipal Retailers' Occupation Tax rules 86 Ill. Adm. Code 270.115 to implement statutory changes to the tax obligation for retailers maintaining a place of business in Illinois making sales to Illinois customers from outside the state. The retailer would be engaged in the business of selling at the Illinois location where the property is shipped or delivered or where the purchaser takes possession. Proposed amendments also would amend sourcing rules for leasing tangible personal property in the state. Beginning on and after January 1, 2025, the Home Rule Municipal Retailers' Occupation Tax applies to leases of tangible personal property in effect, entered into or renewed on or after that date and the business of selling includes leasing tangible personal property. Proposed amendments would provide sourcing guidance for (1) leases that require recurring periodic payments and for which the property is delivered to the lessee by the lessor, and (2) all other leases. For leases requiring periodic payments, the payment would be sourced to the primary location for each period covered by the payment. For all other leases, the payment would be sourced as otherwise provided by applying the Composite of Selling Activities Test and the other Presumptions Applying to Certain Selling Operations under 270.115(c) and (d), respectively.

Comments on the proposed amendments are due no later than 45 days after publication of the Notice of Proposed Amendments. Ill. Dept. of Rev., Proposed Rule 86 Ill. Adm. Code 130, Proposed Rule 86 Ill. Adm. Code 131, Proposed Rule 86 Ill. Adm. Code 150, and 86 Ill. Adm. Code 270 (Ill. Register, Vol 49, Issue 6, Feb. 7, 2025).

Rhode Island: In response to a ruling request from an online company that provides ancestral and health history reports that analyze customer's DNA data from saliva samples, the Rhode Island Division of Taxation (RI DOT) found that the company's product is taxable vendor-hosted prewritten computer software. The RI DOT explained that because the key feature of the product is the company's website, which allows its clients to view data and reports, the product is taxable vendor-hosted prewritten computer software. As vendor-hosted prewritten computer software, the RI DOT said the product is taxable regardless of whether it is bundled with other tangible personal property. Lastly, the RI DOT said the specimen kits, which are used to collect saliva samples, are not subject to use tax as they would be included with the sales price of the software. R.I. Div. of Taxn., Declaratory Order 2025-01 (January 29, 2025).

South Dakota: New law (SB 43) establishes the timeframe in which a remote seller and marketplace provider that meet the collection and remittance criteria in S.D. Code Section 10-64-2 or Section 10-65-5, such as the economic nexus threshold,⁶ must register and remit sales tax. Effective July 1, 2025, remote sellers and marketplace providers do not have to register and remit tax before the first day of the first month that begins at least 30 days after they meet the collection and remittance criteria. S.D. Laws 2025, SB 43, signed by the governor on February 13, 2025.

BUSINESS INCENTIVES

Colorado: The Colorado Department of Revenue (CO DOR) is seeking public input on a draft new Rule 39-22-567 "Quantum Facility Investment Credit Recapture". The intent of the new rule is to clarify when the CO DOR may disallow the quantum facility investment credit and require its recapture. Under the draft rule, the Office of Economic Development (OED) would be required to notify the qualified applicant and the CO DOR that the credit has been disallowed and recapture is required because the qualified applicate, during the compliance period, (1) sold, transferred, abandoned or repurposed a substantial portion of the qualifying fixed capital assets for which they were allowed a credit, or (2) otherwise ceased to operate the shared quantum facility in Colorado. The CO DOR would have to receive such notification from the OED before it may disallow the credit and require recapture. Comments on the draft rule are due by March 7, 2025. The CO DOR noted that it does not plan to convene a workgroup on this rule before formal rulemaking, unless comments indicate that a workgroup is necessary.

Ohio: New law (HB 315) modifies the historic rehabilitation tax credit and the Ohio opportunity zone investment tax credit. The historic rehabilitation tax credit is amended to prohibit the Director of the Department of Development from considering whether the historic building is located in or will benefit an economically distressed area, such as weighting preferences based on the poverty rate of jurisdiction in which the building is located. The list of taxes the opportunity zone investment tax credit can be claimed against is expanded to include the financial institutions tax and the domestic or foreign insurance company taxes (the credit can already be claimed against the income tax). This change applies to credit applications submitted after July 2, 2025. Ohio Laws 2024, HB 315, signed by the governor on January 2, 2025.

PROPERTY TAX

Maine: The Maine Revenue Services (MRS) issued an updated bulletin on the property tax exemption for solar energy equipment. Effective for assessments made on or after April 1, 2025, certain solar equipment that generates heat or electricity may qualify for a property tax exemption. The MRS explained that the exemption applies to solar panels and equipment that either generates the electricity, is necessary for the generation, or converts generated electricity into a usable form, such as racks and mechanical equipment that hold the panels and position the panels to track the sun, inverters, batteries for storing electricity generated by the panels, required wiring, and charge controllers. Equipment not necessary for the generation of electricity and, thus, not eligible for the exemption, includes meters, control panels, transmission lines that run between the inverter and the grid. Land is not eligible for the solar exemption. Equipment used in solar arrays that are under construction and not operational as of April 1 do not qualify for the exemption for the tax year because it is not generating heat or electricity. The MRS noted that property eligible for the solar exemption generally is not eligible for the business equipment tax exemption (BETE); however, an exception may apply to commercial arrays that are not yet operational. Such commercial arrays may qualify for the BETE until they are operational and eligible for the solar exemption. The bulletin describes residential arrays, commercial arrays and the application process. The bulletin includes definitions of various terms, such as "electrical grid," "interconnection agreement," "nameplate capacity," "net energy billing," "solar array" and "solar panel." Maine Rev. Serv., Property Tax Bulletin No. 29 (Dec. 30, 2024).

CONTROVERSY

Wisconsin: The Wisconsin Department of Revenue (WI DOR) updated its guidance on obtaining a private letter ruling. The WI DOR said that taxpayers can request letter rulings on the tax consequences of proposed and completed transactions regarding income, franchise, withholding, sales and use, cigarette, tobacco, alcohol beverage, motor vehicle fuel, alternative fuels, general aviation fuel, and electronic vehicle charging taxes. The WI DOR's guidance lists areas in which it will not rule (e.g., interpretation of federal law, whether a transaction lacks a valid business purpose, tax consequences of proposed federal, state or local legislation) and those which it ordinarily will not rule because of the factual nature of the issue (e.g., market value of property, unitary business issue, validity of an exemption certificate). The WI DOR noted that it may temporarily suspend letter rulings in certain areas that are under extensive study. In certain circumstances, the WI DOR may issue letter rulings pending the adoption of administrative rules. The guidance explains how to request a ruling, the information that must be included in the request, and information that may voluntarily be included in the request. The WI DOR also noted that it will consider written request for expedited processing of the letter ruling. The WI DOR may publish private letter rulings in its newsletter — Wisconsin Tax Bulletin. Lastly, the taxpayer may need to attach a copy of the letter ruling or the ruling request to their tax return. Wis. Dept. of Rev., Publication 111 "How to Get a Private Letter Ruling" (updated February 2025).

PAYROLL & EMPLOYMENT TAX

Multistate: State unemployment insurance (SUI) trust funds are largely financed by employer contributions (in Alaska, New Jersey and Pennsylvania employees also make contributions). States are required to maintain a SUI taxable wage base of no less than the limit set under the Federal Unemployment Tax Act (FUTA). The 2025 FUTA wage limit of $7,000 has remained unchanged since 1983, despite increases in the federal minimum wage and annual cost-of-living adjustments over the last 42 years. Some states are conservative in their approach to maintaining adequate SUI trust fund reserves. Consequently, the SUI wage base is flexible in those states, meaning it is indexed to the average wage and/or or varies based on the trust fund balance. For 2025, 28 jurisdictions have a flexible wage base. Tax Alert 2025-0392 contains the 2025 SUI wage bases and the minimum and maximum SUI tax rates, including surcharges that are not certified and not included in state SUI wages on the federal Form 940.

MISCELLANEOUS TAX

Washington: The Washington Department of Revenue (WA DOR) posted guidance to its website on the taxability of legal settlements. The WA DOR explained that amounts received from settlements and insurance proceeds resulting from engaging in a specific business activity generally are subject to business and occupation (B&O) tax and may be subject to retail sale tax. If the payment is received after engaging in a specific business activity, tax is due based on that activity. For example, if payment is received for the unauthorized use of intangible property, the royalties B&O tax applies and in the case of a breach of a retail construction contract the retailing B&O tax and retail sales tax would apply. If payment is received absent a specific business activity, the service and other activities B&O tax applies. Examples of such include the inability to license a defective patent or inability to sell lost or damaged inventory. B&O tax generally does not apply to payments received for non-business purposes, such as personal injury, property damage (excluding inventory) and certain insurance/other legal settlements. The guidance includes examples. Wash. Dept. of Rev., "Taxability of Legal Settlements" (posted February 2025).

GLOBAL TRADE

Federal: President Donald Trump signed two proclamations on February 10, 2025 reinstating the tariff on steel at 25%, reinstating and increasing the aluminum tariff to 25% as well as adjusting the amount of these imports into the United States (US).⁷ The changes will apply for products that are entered for consumption or withdrawn for consumption as of March 12, 2025.⁸ These two new proclamations are an extension of Proclamations 9704 (Adjusting Imports of Aluminum into the United States) and 9705 (Adjusting Imports of Steel into the United States), signed on March 8, 2018 after the US Department of Commerce's 2018 Section 232 investigation and finding of national security impairment. For more on this development, see Tax Alert 2025-0504.

UPCOMING WEBCASTS

Tuesday, March 11, 2025. Domestic tax quarterly webcast series: a focus on state tax matters (1:00-2:30 p.m. ET). For our first quarterly webcast in 2025, speakers from our Indirect, Washington Council Ernst & Young (WCEY) and Quantitative Economics and Statistics (QUEST) groups will provide an update on the current state of the states and discuss important state tax policy considerations that are emerging in 2025, as well as federal tax and trade policy developments that could affect state and local taxes. Topics will include: (1) state and local revenue and fiscal conditions; (2) governors' budget initiatives; (3) state and local tax legislative and administrative proposals and trends; (4) federal policy developments that could affect state tax policy decisions, including extension of Tax Cuts and Jobs Act provisions and other potential federal tax law changes, federal tax credits and incentives, federal trade policy, and federal and state sustainability initiatives, including increased interest in the creation of state superfunds. Register. Wednesday, March 12, 2025. Sustainability trends and EPR requirements: What companies need to do now (1:00-2:00 pm ET / 10:00-11:00 am PT). US states are imposing new reporting requirements, taxes and fees to curb carbon emissions and fund climate-related projects. The potential divergence between US federal and state sustainability regulatory regimes under the new Trump administration, as well as the difference between regimes in the US and foreign jurisdictions, is creating both challenges and opportunities for businesses. Join Ernst & Young LLP tax and sustainability professionals for an update on the latest state sustainability legislative and regulatory trends, including extended producer responsibility (EPR) packaging programs, which shift the burden of waste management from consumers to producers. Panelists also will explore steps companies should consider taking now to prepare for required compliance and reporting. The following topics will be discussed: (1) evolving legislative and regulatory trends in state sustainability; (2) requirements for existing and emerging EPR bills and implementing EPR packaging programs; (3) ways to evaluate reporting capabilities for effective EPR data collection and compliance; and (4) identification of key organizational stakeholders to enable a comprehensive compliance approach to EPR. Register.

Because the matters covered herein are complicated, State and Local Tax Weekly should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.