Ernst & Young's State and Local Tax Weekly newsletter for March 7 and March 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.

TOP STORIES

Tariff developments in the United States, Canada, Mexico, China and EU during the period of March 6, 2025 through March 13, 2025

On March 6, 2025, US President Donald Trump signed Executive Orders,¹ amending the Executive Orders on "Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border" and "Imposing Duties to Address the Situation at Our Southern Border" originally signed on February 1, 2025.² The new Executive Orders provide exemption from the 25% duty levied on all Mexican and Canadian imports that qualify under the United States-Mexico-Canada (USMCA) Free Trade Agreement. They also adjusted the import duty for nonqualifying potash from Canada and Mexico from 25% to 10%, leaving the 10% duty on nonqualifying Canadian energy products in effect as well.

On March 6, 2025, the White House also released a Fact Sheet, explaining that the adjustment in tariffs is intended to minimize the disruption to the automotive industry, recognizing the impact the duties have to the industry's supply chains. For additional information on this development, see Tax Alert 2025-0626.

Effective March 7, 2025, pursuant to the US Executive Order of March 6, 2025, Canadian-origin imports that qualify under the USMCA are temporarily exempted from the 25% duty levied on Canadian imports. The March 6, 2025 Executive Order also reduced duties for potash from Canada that does not qualify under the USMCA from 25% to 10%. A 10% duty rate on Canadian energy and energy resources remains.³

As a countermeasure to US tariffs, Canada imposed a 25% surtax on US-origin goods pursuant to the United States Surtax Order (2025-1) valued at CA$30b. The surtax came into effect on March 4, 2025. A second round of tariffs on a proposed list of CA$125b worth of additional goods from the United States has been proposed. Canada's Department of Finance is conducting a public consultation process on the proposed list of goods until April 2, 2025. For additional information on this development, see Tax Alert 2025-0646.

On March 12, 2025, shortly after the Trump Administration's steel and aluminum tariffs took effect, the European Union (the EU),⁴ and then Canada,⁵ separately announced their respective retaliatory measures covering approximately US$28b and US$29b of US goods, respectively. The US steel and aluminum tariffs, implemented on March 12, 2025, target all US trading partners with 25% punitive tariffs. Products subject to the tariffs range from industrial-grade steel and aluminum materials to semi-finished and finished products such as steel pipes, wire, engine parts and exercise equipment. The specific Harmonized Tariff Schedule of the United States (HTSUS) codes for the steel and aluminum products and their derivatives are presented in Annex 1 to each of the Federal Register notices issued on March 5, 2025.⁶ The EU and Canada retaliated against US tariffs equivalent to the value of their affected exports. For additional information on this development, see Tax Alert 2025-0659.

On March 12, 2025, the European Commission announced countermeasures in response to steel and aluminum tariffs now being imposed by the US. Since March 12, 2025, the US has been applying Section 232 tariffs of 25% on imports of steel, aluminum and certain products containing steel and aluminum. These measures apply erga omnes (i.e., against all trade partners) and do not specifically target products originating from certain countries. For additional information on this development, see Tax Alert 2025-0689.

Effective March 13, 2025, an additional CA$29.8b worth of products originating in the US are subject to a 25% tariff in Canada pursuant to the United States Surtax Order (Steel and Aluminum 2025) issued under the Customs Tariff. A 25% reciprocal tariff is now in effect for US-origin steel and aluminum products. Retaliatory tariffs also now apply to additional US-origin imports including tools, computers and servers, display monitors, sports equipment and cast-iron products. These tariffs are in addition to Canada's 25% counter tariffs on CA$30b of imports from the US that came into effect on March 4, 2025, pursuant to the United States Surtax Order (2025-1).

Importers may request a remission order of Canadian retaliatory tariffs on US imports based on exceptional circumstances. The duty-drawback and duties-relief programs will remain available for surtax paid or payable on goods, subject to the duty refund provisions of the USMCA. For additional information on this development, see Tax Alert 2025-0700.

For developments post March 14, 2025, see EY Global Tax Alerts EU may postpone countermeasures to US tariffs to mid-April 2025, dated March 24, 2025 and US President Trump announces 25% additional tariff on imported automobiles and automobile parts, dated March 27, 2025.

GOVERNOR BUDGETS

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

North Carolina: On March 19, 2025, Governor Josh Stein presented his 2025-27 budget proposal. The governor's budget makes investments in the economy and the workforce, among other areas. The governor's budget would provide targeted tax relief for middle class families, expand jobs opportunities via investment in apprenticeship programs, establish an IMPACT center that would "improve efficiency and effectiveness of state programs," and freeze current individual and corporate income tax rates (4.25% and 2.25%, respectively) by eliminating future rate reductions. Proposed tax relief for working families would include a refundable working families tax credit (this would be equal to 20% of the federal earned income tax credit), a refundable child and dependent care tax credit (this would equal 50% of the federal credit), converting the child deduction to a refundable child tax credit, and reestablishing the back-to-school sales tax holiday (the budget would hold local jurisdictions harmless for loss of local sales tax revenues).

Ohio: On March 12, 2025, Governor Mike DeWine delivered his 2025 State of the State address. The governor is proposing a refundable child tax credit. For working parents who hold a full-time minimum wage job, the credit would be up to $1,000 per child through age six. The governor is also proposing an increase to online sports gaming companies. (In his 2026-27 executive budget, the governor proposed doubling the tax imposed on sports betting.)

Philadelphia, PA: On March 13, 2025, Philadelphia Mayor Cherelle Paker presented her One Philly 2.0 Budget. To incentivize the building of housing, the Mayor said: "we're going to eliminate the Construction Impact Tax." As for economic opportunity, the Mayor is focused on attracting and growing businesses that will create jobs. To do this, the Mayor said that the City needs to reform its business tax structure. Under the Mayor's plan, the net income portion of the Business Income and Receipts Tax (BIRT) would be reduced to 2.8% within seven years of the pension fund reaching 100% funded status in FY2033, while the gross receipts portion of the BIRT would be eliminated over the same time-period. In the "immediate future" the net income portion of the BIRT would be reduced from 5.81% in FY2025 to 5.5% in FY2030. In addition, the Mayor said that due to constitutional challenges, the existing exclusion for the first $100,000 in gross receipts would be "going away." The Mayor further noted that the City's Commerce Department is ready to move forward with the new Jumpstart Business Program, which would provide $30 million a year to help certain businesses with technical assistance and grants. The reduction of the City's Wage Tax would continue, with reductions starting again in FY2026. The Mayor's plan would reduce the wage tax to 3.7% for residents and 3.39% for non-residents by FY 2030. The Mayor's plan also calls for a "small increase" to the Realty Transfer Tax, an increase to the parking rate from $3 per hour to $4 per hour, and an increase to the Housing Trust Fund portion of the document recording fee by $3.

INCOME/FRANCHISE

San Francisco, CA: The San Francisco tax collector issued for public comments Draft Regulation 2025-1 which would provide guidance on how gross receipts from services, intangible property, and sales of financial instruments are allocated to the city for gross receipts tax purposes. The proposed regulation would apply to the allocation of gross receipts effective for tax years beginning on or after January 1, 2025. A public hearing is scheduled on April 8, 2025. Written comments on the proposed regulation are due by April 18, 2025. A tax alert on the proposed regulation is forthcoming.

Idaho: New law (HB 40) decreases the corporate income tax rate and the income tax rate on individuals, trusts and estates to 5.3% (from 5.695%). The rate change is retroactively effective to January 1, 2025. Idaho Laws 2025, ch. 13 (HB 40), signed by the governor on March 6, 2025.

Louisiana: The Louisiana Department of Revenue issued guidance on individual income tax changes enacted in December 2024 under Act 11. Starting in 2025 the graduated income tax rates and brackets for individuals, estates, trusts and pass-through entities are repealed and replaced with a flat 3% income tax rate. Act 11 increases the standard deduction to $12,500 (from $4,500) for single/married filing separately and $25,000 (from $9,000) for married filing joint, qualifying surviving spouse and head of household. The guidance also describes deductions for bonus depreciation and bonus amortization as well as the caps on the motion picture production tax credit, the research and development tax credit, and the rehabilitation of historic structures tax credit. The guidance lists credits that are repealed and that will be sunset on June 30, 2025. La. Dept. of Rev., Revenue Information Bulletin No. 25-012 (March 7, 2025).

New Mexico: In response to a ruling request on whether sales of operating company products (products) are apportioned to New Mexico and included in the sales factor numerator when the taxpayer uses third-party distributors to deliver or ship the products, the New Mexico Taxation and Revenue Department (NMTD) based its determinations on where the property was delivered or shipped to the purchaser. NMAC Section 3.5.17.8(C) provides that "[p]roperty is delivered or shipped to a purchaser within this state if the shipment terminates in this state, even though the property is subsequently transferred by the purchaser to another state." Under one method of distribution, the products are first shipped from a place of manufacture, purchase or import to a public warehouse and then shipped to designated third-party distributor locations (hereafter, distributor location). The third-party distributor ships the products from the distributor location to other third-party distributors or to retailers. Under this method, the NMTD found that the third-party distributors are the purchasers of the products and products delivered to distributor locations in New Mexico terminate in the state and are sales in the state, regardless of whether the products are subsequently transferred by the third-party to an out-of-state location. Thus, products delivered or shipped to the distributor locations in New Mexico are included in the sales factor numerator. Under the second distribution method, products are delivered to third-party distributors located outside New Mexico and are then distributed from those locations to locations throughout the United States, including to locations in New Mexico. The NMTD said that these are not sales in New Mexico and, therefore, should not be included in the sales factor numerator. N.M. Taxn. and Rev. Dept., Ruling 210-25-1 (February 13, 2025).

Ohio: New law (HB 14) updates Ohio's conformity to the Internal Revenue Code (IRC). Specifically, HB 14 updates Ohio Rev. Code 5701.11, the state's IRC conformity provision, to the effective date of the legislation — March 7, 2025 — and incorporates recent changes to the IRC taking effect after March 15, 2023 (from February 17, 2022). The incorporated changes include those made by the Federal Disaster Tax Relief Act of 2023 (FDTRA). The most significant FDTRA provision affecting Ohio law involves the tax treatment of certain relief payments, namely the FDTRA excludes from a taxpayer's gross income qualified disaster relief payments for losses resulting from the East Palestine train derailment on February 3, 2023. HB 14 also updates a provision allowing a taxpayer, whose tax year ends after March 15, 2023, to irrevocably elect to incorporate IRC provisions that were in effect for that tax year. Taxpayers may make this election by filing the Ohio income tax return, which incorporates those IRC provisions. Similar elections made under prior versions of Ohio Rev. Code 5701.11 remain in effect for the tax years to which those elections applied. HB 14 took immediate effect. Ohio Laws 2025, HB 14, signed by the governor on March 7, 2025. For additional information on this development, see Tax Alert 2025-0562.

South Carolina: The South Carolina Department of Revenue (SC DOR) circulated for public comment a draft revenue ruling on sourcing gross receipts from services. The draft provides guidance on the SC DOR's "current position on the income-producing activity method for sourcing gross receipts from services to South Carolina … including those receipts in the numerator of the gross receipts factor." The draft guidance addresses the following issues: (1) allocation and apportionment of income of a multistate taxpayer; (2) single factor apportionment with discussions on the sales factor and the gross receipts factor; (3) gross receipts; (4) South Carolina's income-producing activity standard, distinguishing this standard from costs of performance and market sourcing, and discussing where such activity occurs, when ancillary/incidental activities are not income-producing, and reasonable approximation; and (5) characterizing transactions. The SC DOR noted that its position may change depending on the outcome of ongoing litigation regarding this issue. Comments are due by April 8, 2025. S.C. Dept. of Rev., SC Revenue Ruling #25-x (public draft March 10, 2025).

SALES & USE

Illinois: In response to a ruling request regarding the application of state and local sales and use tax on leases of tangible personal property, the Illinois Department of Revenue (IL DOR) said that lease receipts subject to Chicago's Personal Property Lease Transaction Tax are exempt from State and IL DOR-administered local retailers' occupation taxes (ROTs). (Effective January 1, 2025, provisions of Art. 75 of Pub. Act 103-592, impose State and local ROT on gross receipts from leases of tangible personal property; see Tax Alert 2024-1178.) The IL DOR explained that gross receipts from the lease of property that is subject to tax on lease receipts by a home rule local jurisdiction will be exempt from State and IL DOR-administered local ROT if the home rule tax was adopted before 2023. The IL DOR noted that if the lease, but for the exemption, would otherwise be subject to tax on leases under Art. 75 of Pub. Act 103-592, then the sale of the property to the lessor would be exempt from state and IL-DOR administered local ROT as a sale for resale. Ill. Dept. of Rev., ST 25-0004-GIL (January 27, 2025).

New York: New law (SB 820) modifies recently enacted provisions that impose the state's sales and use tax on occupancy of a room, or space, in a short-term rental unit. For sales and use tax purposes, the new law modifies definitions of "short-term rental unit" and "booking service," amends the definition of "hotel" to delete "short-term rental units" (which was added by N.Y. Laws 2024, ch. 672), and adds "short-term rental unit" to various definitions including "occupancy," "occupant," "operator," "permanent resident," "room," and "customer." The definition of "person required to collect tax" is expanded to include every operator of a short-term rental unit, every booking service with respect to occupancy of a short-term rental unit, with a limited exclusion for an operator that rents their own property for three days or less during the calendar year and does not use a booking service to facilitate the rental. The new law also modifies provisions regarding the rights and tax collection and remittance obligation of a booking service with respect every occupancy of a short-term rental it facilitates, as well as when an operator is relieved from the duty to collect tax on the occupancy of certain short-term rental units. The operator of a short-term rental unit may be relieved of its requirement to register if its sales are wholly facilitated by booking services from whom the operator received in good faith a certificate of collection or the booking services included a commissioner approved provision in a publicly available agreement between the booking service and the operator. SB 820 took immediate effect; however, the above changes take effect April 20, 2025. N.Y. Laws 2025, ch. 99 (SB 820), signed by the governor on February 28, 2025.

Wyoming: New law (HB 11) extends the sales and use tax manufacturing exemption through December 31, 2042 (from December 31, 2027). The exemption applies to the sales or lease of machinery used in Wyoming directly and predominantly in manufacturing tangible personal property. HB 11 takes effect July 1, 2025. Wyo. Laws 2025, ch. 95 (HB 11), signed by the governor on March 3, 2025.

Wyoming: New law (HB 311) clarifies that the sales tax exemption for sales of power or fuel to a person transporting tangible personal property by railroad or pipeline when the fuel is used to generate the power for actual transportation purposes applies regardless of ownership of the transported property. For purposes of the exemption, the law adds a definition of "pipeline," defining it as "a system of connected pipes and other equipment that is used to transport oil, natural gas or other hydrocarbons from a well site to an interstate or intrastate transmission customer sales delivery point, including between intermediate points along a transportation path." HB 311 takes effect July 1, 2025. Wyo. Laws 2025, ch. 104 (HB 311), signed by the governor on March 4, 2025.

BUSINESS INCENTIVES

Georgia: The Georgia Department of Revenue (GA DOR) issued a policy bulletin to provide notice that it is "implementing changes to the Agreed Upon Procedures of the Mandatory Film Tax Credit Audit Program." The intent of the changes are to streamline the audit process and require certain documentation as needed. Changes include, but are not limited to, the following: (1) modifications to the list of standard business records in Information Document Request #1; (2) standards for documenting original loan-out agreement contracts that contain service obligations for activities related to principal photography; (3) adjustments to certain statistical sampling protocols for airfare, lodging and assets; and (4) adjustments to qualified insurance costs to reflect industry pricing norms. The GA DOR noted that it "will continue to review the [audit] process and may make additional changes to improve efficiency." Ga. Dept. of Rev., Policy Bulletin IT 2025-01 "Film Tax Credit" (March 12, 2025).

Illinois: The Illinois Department of Revenue adopted new regulations — 86 Ill. Adm. Code Sections 100.2161, 100.7385 and 100.7386 — regarding the Quantum Computing Campuses Tax Credit, the Live Theater Production Tax Credit and the Local Journalism Sustainability Tax Credit. The new rules provide guidance on the process for taxpayers to qualify and apply for these credits. The new rules took effect January 31, 2025. Ill. Dept. of Rev., 86 Ill. Adm. Code Sections 100.2161, 100.7385 and 100.7386 (Ill. Reg., Vol. 49, Issue 7, February 14, 2025).

Wisconsin: The Wisconsin Department of Revenue (WI DOR) issued updated guidance on it research expense credit and sales and use tax exemption for property used in qualified research. The guidance: (1) provides an overview of the types of research credits (e.g., research credit for increasing research, research credit for activities related to internal combustion engines, research credit for activities related to certain energy efficient products) and the sales and use tax exemption for property used in qualified research; (2) describes qualified research, including expenses under the IRC Section 174 test, discovering technological information test, business component test, process of experimentation test, and activities that are not qualified research; (3) describes the research expense credit, including the purpose of the credit, credits available, those eligible to compute or claim the credit, qualified research expenses, computation of the credit, credits for combined groups, unused credits; (4) discusses the sales and use tax exemption for qualified research, including who may claim the exemption, property that qualifies for the exemption, who is primarily engaged in biotechnology in the state, the difference between manufacturing and biotechnology, claiming the exemption and record retention; (5) describes how to claim and substantiate the research credit or sale/use tax exemption; and (6) discusses the WI DOR's use of IRS guidance when auditing the research credit and sales tax exemption and lists the primary reasons for why the WI DOR makes adjustments to the Wisconsin research credit. Wis. Dept. of Rev., Publication 131 "Tax Incentives for Conducting Qualified Research" (March 2025).

PROPERTY TAX

Montana: New law (HB 29) requires the Montana Department of Revenue (MT DOR) to establish a process for periodically reviewing exempt property. Under the review process, all exempt property for which an application to the MT DOR is required must be reviewed at least once every eight years. Information on exempt property that the MT DOR reviewed during the biennium that it must report to the revenue interim committee includes the number of properties and types of exemptions reviewed, the number of exemptions granted and denied, and the estimated market value of the exemptions granted and denied. The MT DOR also must maintain public information about real property that is exempt from property tax, including a map of tax-exempt property that is organized by county and type of exemption, as well as the name and mailing address of the owner or entity using the exemption. Mont. Laws 2025, ch. 14 (HB 29), signed by the governor March 4, 2025.

Nebraska: New law (LB 194) clarifies the documentary stamp tax exemption. For purposes of the exemption for deeds between family members, the law considers step relationships the same as blood relationships. The law also clarifies the exemption for deeds transferring property from a family corporation or a limited liability company (LLC). The exemption applies to deeds transferring property to a corporation or LLC that is wholly owned by a single shareholder/member if any of the following are met: (1) the grantor is the same person as the single owner of the corporation or LLC; (2) the grantors are spouses transferring property to a corporation or LLC wholly owned by one of the spouses; or (3) the grantors are members of a family transferring property to a corporation or LLC wholly owned by one of the family members. LB 194 takes effect three months after the legislative session ends. Neb. Laws 2025, LB 194, signed by the governor on February 25, 2025.

Wyoming: New law (SF 61) clarifies that the property tax exemption for property primarily used for the elimination, control or prevention of air, water or land pollution does not include facilities constructed for the sole purpose of capturing nonpoint source carbon dioxide. This change takes effect on January 1, 2026. The law also directs the Wyoming Department of Revenue to promulgate any rules necessary to implement SF 61. Wyo. Laws 2025, ch. 55 (SF 61), signed by the governor on February 27, 2025.

COMPLIANCE & REPORTING

Montana: New law (SB 54) reduces the threshold for when taxes must be paid via electronic funds transfer (EFT). Starting in 2026, all taxes due to Montana must be paid by EFT when the amount due is $50,000 or more (from $500,000 or more). The Montana Department of Revenue must adopt rules necessary to implement this provision. The rules, among other things, must specify acceptable forms and methods of electronic payment and provide for an alternative form of payment when electronic payment is not available to the taxpayer. Mont. Laws 2025, ch. 11 (SB 54), signed by the governor on February 28, 2025.

CONTROVERSY

Alabama: The Alabama Department of Revenue (AL DOR) adopted amendments to Ala. Rule 810-14-1-.30.01 "Penalty for failure to timely file tax." The penalty for failure to file applies to any form or return required to be filed with the AL DOR. Amendments to the rule expand the definition of "form" or "return" to include Schedule K-1. The amended rule takes effect April 14, 2025. (Ala. Admin. Monthly, Vol. XLIII, Issue No. 5, February 28, 2025).

Georgia: The Georgia Department of Revenue adopted amendments to Ga. Comp. R. & Regs. Section 560-1-1-.14 "Electronic Signature and Remote Notary," modifying the definition of "remote notarization." As amended, "remote notarization" means "a notarization that has been performed remotely in compliance with the laws of a state which permits remote notarization by the notary publics of that state." The prior definition of "remote notarization" required the notarization meet certain requirements, including that the notary public use a real-time audio-video communication technology, that they are an attorney licensed to practice law in Georgia or operating in Georgia under the supervision of a licensed attorney, the signer requiring the notary provides evidence of identity during the real-time audio-video communication technology, the notary public is physically located in Georgia, and the signer transmits a copy of the signed document to the notary public on the same date it was executed. The amended rule takes effect March 26, 2025.

PAYROLL & EMPLOYMENT TAX

Delaware: HB 433 made significant changes to Delaware's state unemployment insurance (SUI) law, which will collectively change the amount of SUI taxes paid by many experience-rated employers. Under prior law adopted in 2013 (HB 168), and except for a temporary measure effective only for the 2019 tax year (HB 198), the SUI wage base was tied to the state's unemployment insurance trust fund balance as of September 30: (1) $18,500 if the balance is $125 million or less; (2) $16,500 if the balance is greater than $125 million, but less than $175 million; (3) $14,500 if the balance is at least $175 million, but not greater than $ 225 million; (4) $12,500 if the balance is greater than $225 million, but less than $275 million; and (5) $10,500 if the balance is $275 million or greater. The SUI wage base was $10,500 for 2023 and 2024. Effective January 1, 2027, HB 433 moves Delaware to a fixed SUI wage, which increases incrementally each year until it reaches $16,500 in 2027. For additional information on this development, see Tax Alert 2025-0647.

Seattle, WA: Seattle voters recently approved citizen-led ballot initiative Proposition 1A, which, effective January 1, 2025, imposes a new employer-paid Social Housing Tax to fund the Seattle Social Developer, a voter-approved agency created in February 2023 to support mixed-income social housing. The Social Housing Tax applies to businesses operating in Seattle (with limited exceptions). Employers will be taxed 5% of the excess compensation (over $1 million) paid to an employee in the prior calendar year. For 2025, the Social Housing Tax return and payment are due January 31, 2026. Thereafter, the return and payment are due quarterly on the last day of the month following the close of the calendar quarter. This new tax is expected to generate annual revenues of $52 million. For more on this development, see Tax Alert 2025-0706.

MISCELLANEOUS TAX

Arkansas: New law (HB 1411) provides that the Oil and Gas Commission in administering the underground storage of carbon dioxide and the Underground Injection Control program, has the power and duty to require: (1) the payment of a carbon dioxide storage permit application fee not to exceed $50,000; (2) an annual well fee of $1,000 per Class VI injection well permitted in the carbon dioxide storage facility; and (3) a $0.10 fee on each ton of carbon dioxide injected for storage. HB 1411 takes effect 90 days after the legislature adjourns sine die. Ark. Laws 2025, Act 149 (HB 1411), signed by the governor on February 25, 2025.

Washington: The Washington Department of Revenue (WA DOR) posted guidance on the application of Business and Occupation (B&O) tax to director fees. Washington imposes B&O tax on amounts received by an individual from a corporation for serving on the corporation's board. Specifically, all compensation received for services rendered as a corporate director are subject to the service and other activities B&O tax. Such compensation includes fees, awards, bonuses, the value of stock options or property received in exchange for services, and reimbursements of expenses incurred in providing such services (e.g., telephone, travel expenses, meeting preparation fees). If the corporate director is also an employee of a corporation, B&O tax only applies to nonemployee director fees received for services rendered. Income earned as an employee are not subject to B&O tax. Corporate directors who are subject to tax in Washington and other states may be able to apportion their taxable income for B&O tax purposes. The WA DOR further said that a corporate director must register if they have nexus with the state. Nexus is created if in the current or prior year, the corporate director has a physical presence in Washington, has more than $100,00 in combined gross receipts sourced/attributed to Washington, or is domiciled in Washington. The guidance describes how to report tax due, noting that the WA DOR may allow a corporation to report and pay taxes on behalf of their registered directors. A corporation volunteering to do so must complete the Corporate Director Fees B&O Tax Payment Agreement. Wash. Dept. of Rev., Director fees subject to Business and Occupation (B&O) tax website (March 10, 2025).

VALUE ADDED TAX

International — EU: On March 11, 2025, the Council of the European Union (EU) agreed on the "VAT in the Digital Age" (ViDA) package (following the unanimous agreement reached by the EU Member States' Finance Ministers on November 5, 2024). A news announcement on the European Commission's website notes that the ViDA package "will be rolled out progressively until January 2035." The aim of the package is to modernize and improve the value-added tax (VAT) system in the EU to better align with the digital economy and prevent tax fraud. The package covers a directive, a regulation and an implementing regulation and brings changes to three different aspects of the VAT system. For additional information on this development, see Tax Alert 2025-0656.

International — South Africa: On March 12, 2025, while tabling the national annual budget, the South African Finance Minister announced that the value-added tax (VAT) rate will increase by 0.5% to 15.5% on May 1, 2025, and by another 0.5% to 16% on April 1, 2026. Whether the South African Government of National Unity will approve the VAT rate increase is currently uncertain. However, as per the South African VAT Act, the rate increase becomes effective on the date announced in the national annual budget and lasts for 12 months, provided Parliament passes legislation to confirm it. Therefore, the first 0.5% rate increase will be effective from May 1, 2025, unless Parliament passes legislation to the contrary. For additional information on this development, see Tax Alert 2025-0695.

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.