23 April 2025 State and Local Tax Weekly for March 21 and March 28 Ernst & Young's State and Local Tax Weekly newsletter for March 21 and March 28 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. New York Tax Appeals Tribunal rules on various broker-dealer specific issues reversing in part the NY DTA decision in Matter of Jefferies Group LLC & Subsidiaries In Matter of Jefferies Group LLC & Subsidiaries,1 the State of New York Tax Appeals Tribunal (Tribunal) affirmed in part and reversed in part the New York Division of Tax Appeals (NY DTA) determination on various broker-dealer specific issues related to the taxpayer's corporate tax filings under Article 9-A. (The NY DTA's rulings are discussed in Tax Alert 2023-1643.) Specifically, the Tribunal:
All New York corporate taxpayers should review and consider whether the Tribunal's findings on these issues have broader implications to their particular fact patterns. For additional information on this development, see Tax Alert 2025-0799. Effective April 2, 2025, the Texas Comptroller of Public Accounts (Comptroller) has adopted final amendments to 34 Tex. Admin. Code Section 3.330, on the sales and use tax treatment of data processing services.2 The final amendments make some revisions to the proposed amendments released by the Comptroller in October 2024 (see Tax Alert 2024-1861). Notably, the Comptroller announced that amendments affecting marketplace providers will not go into effect until October 1, 2025, which allows the Texas Legislature an opportunity to adopt legislation3 on the subject.4 The final amendments expand the definition of data processing, include examples of taxable and nontaxable data processing services, require data processing service providers to register for a Texas Sales and Use Tax Permit, update the rules dealing with the sourcing of data processing, and implement an "ancillary test" to determine if a service is considered data processing. The proposed changes would have classified search engine optimization services, social media marketing and lead generation as taxable data processing. Based on public comments, the Comptroller agreed to remove those terms "as they did not provide sufficient guidance to taxpayers." The Comptroller noted, however, that it would review those services on a case-by-case basis to determine if the service meets the definition of taxable data processing services. With the exception of the changes affecting marketplace providers, the Comptroller declined to adopt public comments that argued the amendments should only be applied prospectively. The Comptroller reasoned that the amendments to Section 3.330 adopt "current policy regarding services that meet and that do not meet the definition of data processing." For additional information on this development, see Tax Alert 2025-0897. Federal: Proposed bill (HR 427 — the "Interstate Commerce Simplification Act of 2025") would amend P.L. 86-272 to expand the definition of "solicitation of orders" to mean "any business activity that facilitates the solicitation of orders even if that activity may also serve some independently valuable business function apart from solicitation." HR 427 was introduced on January 15, 2025 and has been referred to the House Committee on the Judiciary. A similar measure, HR 8021, was proposed in the previous Congressional session. Indiana: The Indiana Department of Revenue has promulgated an administrative rule, 45 IAC 3.1-1-55.5, which reflects legislation enacted in 2019 that moved Indiana to market-based sourcing for apportioning receipts.5 The new rule replaces 45 IAC 3.1.1-55, which reflected a cost-of-performance approach. For additional information on this development, see Tax Alert 2025-0762. Kentucky: New law (HB 775), among other changes, updates Kentucky's federal conformity date to the IRC in effect on December 31, 2024 (from December 31, 2023).6 This change applies to tax years beginning on or after January 1, 2025. This update excludes any IRC amendments made after that date, unless the amendments extend provisions in effect on December 31, 2024, that would otherwise terminate. Ky. Laws 2025, ch. 98 (HB 775), became law without the governor's signature on March 26, 2025. For additional information on this development, see Tax Alert 2025-0708. Kentucky: New law (HB 1) reduces the Kentucky individual income tax rate from 4% to 3.5%, effective for tax years beginning on or after January 1, 2026. The individual income tax rate may be reduced in subsequent years if fiscal conditions are met. Under current law, the rate reduction would be 0.5%. Provisions of HB 775, however, modifies the income tax reduction process and allows for reductions ranging from 0.1% up to 0.5%, depending on which tax rate reduction condition is met. The corporate income tax rate remains at 5%. Ky. Laws 2025, ch. 1 (HB 1), signed by the governor on February 6, 2026; ch. 98 (HB 775), became law without the governor's signature on March 26, 2025. For more on this development, see Tax Alert 2025-0708. Massachusetts: On March 28, 2025, the Massachusetts Department of Revenue (MA DOR) circulated proposed amendments to 830 CMR 63.39.1: Corporate Nexus. The proposed amendments would add an example of when in-state internet activities may not be entirely ancillary to the solicitation of orders of tangible personal property, such that the activity would not fall under the protection of P.L. 86-272. Activity that may not be entirely ancillary would include "the placement of Internet cookies onto the computers or other electronic devices of in-state customers that gather customer search information used to adjust production schedules and inventory amounts, develop new products, or identify new items to offer for sale." The MA DOR will hold a hearing on the proposal on April 29, 2025. Mississippi: New law (HB 1) will phase out Mississippi's individual income tax, with scheduled rate cuts on all taxable income of individuals in excess of $10,000 that will reduce the current 4.4.% rate down to 3% by calendar year 2030 and, starting in 2031, contingent rate reductions that as revenue thresholds are met will reduce the rate to zero. Specifically, the individual income tax rate will be reduced to: Starting in 2031, the amount of the individual income tax rate reduction — either 0.2%, 0.25% or 0.3% — depends on the percentage by which the Adjusted General Fund Revenue Collections for a fiscal year (beginning with FY 2029) exceeds the appropriations for the following year (beginning with FY 2030). If the revenue threshold is met, the rate reduction would be effective for the calendar year beginning after the close of the FY pertaining to the appropriations figure used in the calculation. When the application of the rate reduction results in a 0% tax rate on all taxable income of individuals in excess of $10,000, the tax will be eliminated. Miss. Laws 2025, HB 1, signed by the governor on March 27, 2025. Utah: New law (SB 219) modifies the apportionment formula used by financial institutions to determine their Utah-source income for corporate franchise and income tax purposes. Effective for tax years beginning on or after January 1, 2026, the law excludes sales from "investment activities or assets or trading activities or assets" from the numerator of a financial institution's sales factor but leaves them in the denominator. The law defines "sales from investment activities and assets and trading activities and assets" as "receipts from interest, dividends, a net gain, but not less than zero, or other income from an investment security, a trading account asset, federal funds, a security purchased and sold under an agreement to resell or repurchase, an option, a future contract, a forward contract, equities, a foreign currency transaction, or a notional principal contract, such as swaps." Examples of these sales include the amount by which: (1) interest from federal funds sold and securities purchased under resale agreements exceed interest expense on federal funds purchased and securities sold under repurchase agreements, and (2) interest, dividends, gains and other income from foreign currency transactions and trading assets and activities exceed amounts paid in lieu of interest or dividends and losses from trading assets and activities. These sales do not include: receipts from leases of real property or tangible personal property interest from a loan secured by, or not secured by, real property; net gain from the sale of a loan; receipts from a credit card receivable; net gain from the sale of a credit card receivable; credit card issuer's reimbursement fees; receipts from a merchant discount; loan servicing fees; receipts from a service; and other receipts not addressed previously. The law requires the Tax Commission to promulgate rules establishing the sales to be included in a financial institution's sales-factor fraction. Utah Laws 2025, SB 219, signed by the governor on March 25, 2025. For more on this development, see Tax Alert 2025-0919. Utah: New law (HB 106) reduces the corporate and individual income tax rates to 4.5% (from 4.55%). HB 106 takes effect on May 7, 2025, but applies retroactively to tax years beginning on or after January 1, 2025. Utah Laws 2025, HB 106, signed by the governor on March 26, 2026. Idaho: New law (HB 144) exempts "small sellers" from having to obtain a sales and use tax permit or collect and remit state sales and use tax. For purposes of this exemption a small seller is "an Idaho resident making sales that do not exceed … $5,000 … in cumulative gross receipts in the current or previous calendar year." A small seller does not include a partnership, corporation or limited liability corporation. The exemption does not apply to sales of motor vehicles, trailers, all-terrain vehicles, utility vehicles, certain off-road vehicles and motorcycles, snowmobiles, aircraft, certain vessels, tobacco, alcohol, and items purchased to be sold or incorporated into items that will be sold. Small sellers that exceed the $5,000 threshold have 30 days to file with the state tax commission an application for a temporary seller's permit and start collecting tax. This change takes effect on July 1, 2025. Idaho Laws 2025, ch. 86 (HB 144), signed by the governor on March 17, 2025. Mississippi: New law (HB 1) impose a 5% sales tax rate on food or drink for human consumption not purchased with federally provided food stamps, but that would be exempt from tax under Miss. Code Section 27-65-111(o) if the items were purchased with food stamps. This rate applies starting July 1, 2025. Miss. Laws 2025, HB 1, signed by the governor on March 27, 2025. South Carolina: The South Carolina Department of Revenue (SC DOR) issued a revenue ruling to provide sales tax guidance to retail businesses and certain industries withdrawing items from inventory for its own use. Under South Carolina law, a retailer's withdraw of tangible personal property previously purchased at wholesale from its inventory for its own use or consumption is considered a retail sale subject to the state's sales tax, unless an exclusion applies. The tax base upon which sales tax on the withdrawn inventory is calculated is the "gross proceeds of sales," which includes the fair market value (FMV) of the withdrawn inventory (i.e., the price the property is offered for sale by the retailer withdrawing the item). Further, if the retailer offers a discount to customers on the retail price of the item, the retailer also may deduct any cash or other customary discount provide to customers from the FMV when determining the tax base. If the retailer transfers tangible personal property purchased at wholesale to a customer for no or nominal consideration or at amount significantly below cost (collectively "nominal consideration"), such property is presumed to be a promotional item withdrawn from inventory and used or consumed by the retailer. In this instance, tax would be based on the property's FMV. If, however, the item is withdrawn for use or consumption in connection with the retailer's business at nominal consideration, then tax is based on the price the retailer paid when it purchased the item at wholesale. The guidance list various withdrawals excluded from sales tax — either as an exclusion from "gross proceeds of sales" or from "sale at retail" or "retail sale." Such exclusions include withdrawals previously withdrawn and taxed; tangible personal property that becomes an ingredient or component part of tangible personal property manufactured or compounded for sale; tangible personal property used to replace defective parts underwritten in warranty contracts; automobiles from dealership inventories that are furnished at no cost to high schools for student driver training or used by a dealership as a demonstrator; tangible personal property used directly in manufacturing, compounding or processing such property for sale; and materials, containers or bags used incident to the sale and delivery of tangible personal property. An operator of a dual business, i.e., makes both retail sales and withdrawals for use from the same stock of goods that are purchased at wholesale, must report sales tax on the retail sales and withdrawals of inventory based on the FMV of the items. The SC DOR noted that "the dual business regulation only applies to those retail businesses that have a substantial number of retail sales." The guidance discusses special provisions that apply to certain business operations and industries, including renting or leasing, airport fixed based operators, selling ice, hotels whose room price includes complimentary breakfast, railroads, and provision of ophthalmologist, oculists and optometrists services. The guidance includes examples. The revenue ruling is effective for all periods open under the statute. S.C. Dept. of Rev., Revenue Ruling #25-3 (March 20, 2025). South Dakota: New law (HB 1245) exempts from state sales and use tax gross receipts from certain services to a partnership. Specifically, the exemption applies to gross receipts from services rendered by: (1) a natural person to a business taxed as a partnership in which the natural person is an owner; (2) a limited liability company (LLC), which has no employees and is wholly owned by a natural person, to a business taxed as a partnership in which the LLC is an owner; and (3) a corporation, which is wholly owned by a natural person and has no employees other that its owner, to a business taxed as partnership in which the corporation is an owner. HB 1245 takes effect on July 1, 2025. S.D. Laws 2025, HB 1245, signed by the governor on March 17, 2025. Utah: New law (SB 47), effective July 1, 2025, modifies Utah's economic nexus provisions by repealing the 200 or more separate transaction threshold. Under the revised law, nexus will be created for a seller that sells tangible personal property, electronically transferred products, or services for storage, use or consumption in Utah if in the prior or current calendar year, the seller's gross revenue from such sales is more than $100,000. Similarly, a marketplace facilitator must pay or collect and remit tax if in the prior or current calendar year, its sales of tangible personal property, electronically transferred products, or services that are made on its own behalf or facilitated on behalf of one or more marketplace sellers, exceeds $100,000. Marketplace sellers also must collect and remit tax for sales of tangible personal property, electronically transferred products, or services if its sales, other than through a marketplace facilitator, in the prior or current calendar year exceed $100,000. Utah Laws 2025, SB 47, signed by the governor on March 25, 2025. Utah: New law (SB 213) exempts from sales and use tax certain purchases or leases of an operator of a qualifying energy storage manufacturing facility (i.e., a facility that manufactures, in Utah, equipment or devices that store and discharge energy to provide electrical power). Effective July 1, 2025, the exemption applies to amounts paid or charged by such operator for: (1) the purchase of tangible personal property incorporated into equipment or a device that stores and discharges energy at the qualifying energy storage manufacturing facility, and (2) the purchase or lease of machinery, equipment, or normal operating repair or replacement parts if such items are used exclusively in the facility's operation. Utah Laws 2025, SB 213, signed by the governor on March 26, 2025. Utah: New law (SB 91), effective January 1, 2026, allows a county to impose up to a 1% tax on sales of alcoholic beverages, food and food ingredients, or prepared food sold by a restaurant as well as customized prepared food sold by a convenience store, a gas station, or a grocery store. Under prior law, counties could tax such sales made by a restaurant. Utah Laws 2025, SB 91, signed by the governor on March 25, 2025. Virginia: New law (HB 2675 and SB 871) extends through 2028 (from 2025) the expiration date of the retail sales and use tax exemption for an advertising business's purchases of printing materials from a Virginia printer for distribution outside the commonwealth. HB 2675 and SB 871 take effect on July 1, 2025. Va. Laws 2025, ch. 307 (HB 2675) and ch. 318 (SB 871), both bills signed by the governor on March 21, 2025. Virginia: New law (HB 1729 and SB 942) extends through July 1, 2030 (from July 1, 2025) the sales and use tax exemption for parts, engines and supplies used for maintaining, repairing or reconditioning aircraft or any aircraft's avionics system, engine or component parts. For purposes of this exemption, aircraft includes both manned and unmanned systems; manned systems, however, only include aircraft with a maximum takeoff weight of at least 2,400 pounds. The new law takes effect July 1, 2025. Va. Laws 2025, ch. 137 (HB 1729) and ch. 152 (SB 942), both bills signed by the governor on March 19, 2025. Washington: The Washington Department of Revenue (WA DOR) issued an Excise Tax Advisory (ETA) on the application of multiple points of use (MPU) sales tax exemption (MPU exemption) to sales of software maintenance agreements (SMA).7 The ETA covers SMAs that involve bundled transactions. Generally, a SMA is one between a software vendor and a customer that requires the vendor to provide technical support and updates for an existing software product, including software upgrades and fixes and support services related to prewritten software. Per the ETA, retail sales tax generally applies when a single nonitemized price is charged for the sale of an SMA that provides both retail-taxable and -nontaxable products, unless the charge for the taxable products is a de minimis part of the SMA. (This type of SMA is referred to as a mixed element SMA.) SMAs that only provide retail-nontaxable products are not subject to retail sales tax. If the taxable and nontaxable elements are separately stated on binding sales or other sales-related documents made available to the customer within an SMA, then each activity is "taxed according to the nature of the activity." The ETA describes the application of the MPU exemption, noting that purchases of products eligible for the MPU exemption include digital goods, prewritten computer software, remotely accessed prewritten computer software, digital automated services, and digital codes. The ETA explains (1) when a mixed element SMA that qualifies as a bundled transaction and is otherwise subject to retail sales tax is eligible for the MPU exemption, and (2) how to apportion and pay use tax for qualified MPU transactions (with specific guidance when there is one MPU-eligible product and multiple MPU-eligible products). The WA DOR has the authority to authorize or require the use of an alternative apportionment method that fairly reflects the proportion of in-state to out-of-state use by the taxpayer. The ETA includes illustrative examples and describes documentation requirements. Wash. Dept. of Rev., ETA 3242.2025 (issued March 27, 2025). Mississippi: New law (HB 1644) modifies certain income and ad valorem tax credits and sales and use tax exemptions available under the Mississippi Broadband Technology Development Act. For purposes of these credits and exemptions, the law amends the definition of "equipment used in the deployment of broadband technologies" and extends the sunset date of the credits and exemption through investments in, and sales of, equipment to telecommunications enterprises before July 1, 2030 (from July 1, 2025). Starting in 2025, and for each year thereafter, the aggregate amount of income and corporate franchise credit that may be claimed during the calendar year is capped at $15 million, with a $1.5 million cap on a single telecommunications enterprise, exclusive of credits that are carried forward from previous tax years. If the total credits requested exceed $15 million, credits will be allocated to each telecommunications enterprise on a prorated basis. The Mississippi Department of Revenue is directed to adopt rules to administer this credit. The ad valorem tax exemption for equipment used in the deployment of fixed broadband technologies by a telecommunications enterprise that is placed in service after June 30, 2025 and before July 1, 2030, will last for up to 10 years or five years, depending on the equipment's average transmission speed. Taxpayers seeking this exemption must "submit a certified, sworn description of such equipment" by April 1 of the first assessment year in which the exemption is being claimed. The changes to the sales and use tax exemption take effect from and after July 1, 2025 and the changes to the income, corporate franchise and ad valorem taxes took effect from and after January 1, 2025. Miss. Laws 2025, HB 1644, signed by the governor on March 28, 2025. Mississippi: New law (HB 1901) enhances and extends the equity investment tax credit. The maximum aggregate amount of qualified equity investments that may be allocated is capped at $16 million (from $15 million). The Mississippi Development Authority may not allocated credits under this section after July 1, 2029 (from July 1, 2024). HB 1901 took effect and is in force from and after January 1, 2025. Miss. Laws 2025, HB 1901, signed by the governor on March 28, 2025. North Dakota: New law (SB 2038) modifies disclosure provisions related to tax incentives. Under current law, the tax commissioner, upon written request by certain members of the legislature, must disclose the amount of any tax incentive (changed from "tax deduction or credit") that was claimed or earned by a taxpayer. The new law defines, for purposes of this provision, a "tax incentive" to include a tax deduction, credit, or exemption. This change is retroactively applicable to tax incentives claimed or granted after December 31, 2024. N.D. Laws 2025, SB 2038, signed by the governor on March 24, 2025. Texas: The Texas Comptroller of Public Accounts (Comptroller) issued a memorandum stating that for purposes of calculating the Texas research and development credit, an expense for depreciable property allowed under IRC Section 174 cannot qualify as supply qualified research expense under IRC Section 41. The Comptroller explained that "depreciable property" is excluded from the definition of supplies under IRC Section 41(b)(2)(C), and "an expense being deductible under IRC [Section] 174 does not affect that definition." Tex. Comp. of Pub. Accts., STAR System No. 202503003M (March 24, 2025). Texas: The Texas Comptroller of Public Accounts issued a memorandum stating that the federal intra-group transaction regulations do not apply when determining the Texas franchise tax research and development (R&D) credit or the sales tax R&D exemption. Tex. Comp. of Pub. Accts., STAR System No. 202503004M (March 24, 2025). Utah: New law (HB 106) establishes a nonrefundable corporate and individual income tax credit to employers for employer-provided childcare services. Available credits equal (1) 20% of the qualified construction expenditures and (2) 10% of the qualified childcare expenditures, the qualifying taxpayer incurred during the tax year. Excess credit may not be carried forward. HB 106 takes effect on May 7, 2025, but applies retroactively to tax years beginning on or after January 1, 2025. Utah Laws 2025, HB 106, signed by the governor on March 26, 2026. Virginia: New law (HB 2163) modifies Virginia's enterprise zone real property investment grant program. On and after July 1, 2025, grants to major qualified zone investors (i.e., an investor making qualified real property investments exceeding $20 million) is calculated at a rate of 25% of the amount of qualified real property investments: (1) exceeding $500,000 in the case of the construction of a new building or facility, or (2) exceeding $100,000 in the case of the rehabilitation or expansion of an existing building or facility. A real property investment grant to a major qualified zone investor is capped at $300,000 within any five-year period for any individual building or facility. The law also expands the definition of "qualified real property investment" to include a child day center. Lastly, the law requires the Department of Housing and Community Development, in collaboration with the Virginia Economic Development Partnership Authority, to convene a work group to review the use of currently designated enterprise zones and to make recommendations on renewals or terminations of such zones. The work group's findings and recommendations are due to the legislature by November 1, 2025. Va. Laws 2025, ch. 250 (HB 2163), signed by the governor on March 21, 2025. Utah: New law (SB 13) allows qualified rental businesses to charge a "recovery fee" on the rental of heavy equipment for reimbursement of property taxes; the recovery fee may not be charged to a governmental entity. The rate of the recovery fee is 1.5% of the rental charge for each item of heavy equipment rented in Utah. The rental charge does not include any additional charges separate from the cost of the rental transaction, such as delivery or insurance costs. The recovery fee must be separately stated, and it is not subject to sales and use tax. Heavy equipment is defined as tangible personal property that (1) is owned by a qualified rental business for purposes of renting; (2) is used or designed for construction, earthmoving or industrial operations; and (3) is portable and transferable to the location where the heavy equipment is used. Examples of heavy equipment include, but are not limited to, lift equipment, cranes, pumps, compressors, generators, tank trailers, and portable worksite offices. SB 13 takes effect January 1, 2026. Utah Laws 2025, SB 13, signed by the governor on March 26, 2025. Virginia: New law (HB 1896) provides that an organization's property that is exempt from taxation by classification (e.g., property owned by Virginia or political subdivisions, real and personal property owned by a church, property owned by public libraries, parks and playgrounds), includes real and personal property of a single member limited liability company whose sole member is such organization. HB 1896 takes effect July 1, 2025. Va. Laws 2025, ch. 86 (HB 1896), signed by the governor on March 18, 2025. Wyoming: New law (HB 279) provides that when more than one exemption applies to a property, the Department of Revenue, in accordance with the following, will determine the order in which the exemptions will be applied. If the exemption is to a portion of the property's assessed value, the exemption will be applied in sequence so that the subsequent exemptions apply to the property's assessed value as modified by the preceding exemption. If the exemption is based on a percentage of the property value, the exemption applies in order of the smallest to largest percentage. Exemptions not based on a percentage of property value are applied after those that are. HB 279 took effect upon becoming law. Wyo. Laws 2025, ch. 147 (HB 279), signed by the governor on March 17, 2025. Colorado: New law (SB 25-046) establishes uniform confidentiality standards for taxpayer information for local taxing jurisdictions'8 sales or use tax investigations. Unless otherwise provided or allowed by a judicial order, a third-party auditor is prohibited from divulging or making known any information obtained from a sales or use tax investigation it conducted on behalf of a local taxing jurisdiction, or disclosed in documents, reports or returns filed in connection with such taxes or fees. A third-party auditor that has custody over the information, documentation and reports gathered during the investigation generally will not be required to produce any information or documentation in an action or court proceeding except for those in which the local taxing jurisdiction authorizing the investigation is a party. The new law list specific situations in which the third-party auditor may disclose certain information, including disclosing such information and documentation to an official, employee, hearing officer, attorney or other public agent of the local taxing jurisdiction who is authorized to receive the information, as well as to the taxpayer and the taxpayer's duly authorized representative. The third-party auditor also may disclose the information to the Colorado Revenue Department and the Internal Revenue Service "as necessary and pertinent to a taxpayer's compliance or failure to comply with state or federal tax law." Taxpayer may voluntarily waive these confidentiality protections. For purposes of these provisions, a "public agent of a local taxing jurisdiction" includes an official, employee or agent of (1) the Department of Revenue who conducts a sales or use tax investigation and (2) the Multistate Tax Commission who conducts and sales or use tax investigations on behalf of a local taxing jurisdiction. SB 25-046 takes effect July 1, 2025. Colo. Laws 2025, ch. 20 (SB 25-046), signed by the governor on March 20, 2025. Colorado: On May 8, 2025, the Colorado Department of Revenue will hold a public rulemaking hearing on a proposed new rule — Rule 39-22-601.5-1 — which would provide guidance to partnerships and partners on reporting and payment requirements related to federal partnership adjustments. Topics addressed by the proposed rules include the partnership federal adjustments report, reporting partners' shares of federal adjustments, the partnership election to pay the amount due in lieu of tax on partners, estimated tax payments, and alternative reporting and payment methods. Additional information on the hearing is available here. Kentucky: New law (SB 84) makes clear that "[t]he interpretation of a statute or administrative regulation by an administrative body shall not be entitled to deference from a reviewing court." Rather, a court will apply de novo review when reviewing an administrative body's interpretation of statutes, administrative regulations and other questions of law. In enacting this change, the General Assembly, mentioned the recent U.S. Supreme Court ruling in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). Ky. Laws 2025, ch. 112 (SB 84), signed by the governor on March 27, 2025. Pennsylvania: On March 18, 2025, the Pennsylvania Department of Revenue announced a new online platform — the Board of Appeals Online Petition Center — for Pennsylvania taxpayers to file an appeal or submit a refund request. The Online Petition Center will allow taxpayers to check the status of their submission, including confirming that the appeal was received and when it has been assigned to a hearing officer. Idaho: On March 6, 2025, Idaho Governor Brad Little signed into law HB 40, which retroactive to January 1, 2025, lowers the income tax rate for individuals, trusts and estates from 5.695% to 5.3% on income exceeding $2,500 ($5,000 for married persons filing joint). The revised income tax withholding formula and tables, once available, will be published here. For more on this development, see Tax Alert 2025-0705. Michigan: The Michigan Department of Labor & Economic Opportunity (Department) announced in December 2024 that the 2025 state unemployment insurance (SUI) wage base is lowered from $9,500 to $9,000 for qualifying employers because the SUI Trust Fund balance exceeded the statutory trigger of exceeding $2.5 billion on June 30, 2024. The reduced SUI wage base of $9,000 applies to non-delinquent employers that have no missing or estimated SUI tax reports and an unpaid SUI tax balance of less than $25, including penalty and interest. For additional information on this development, see Tax Alert 2025-0779. Ohio: Effective January 1, 2025, Ohio regulations simplify state unemployment insurance (SUI) reporting and tax payments for employers with employees who work concurrently for more than one related employer. Under the prior rules, Ohio, like most other states, required that SUI be reported and paid by the entity that had direction and control over the employee. Consequently, when an employee worked concurrently for more than one related employer, SUI had to be reported and paid by all employers having direction and control of the employee. This process increased the reporting burden for related employers and created the complexity of having more than one SUI tax rate for an employee. For additional information on this development, see Tax Alert 2025-0752. Mississippi: New law (HB 1) gradually increases the excise tax on gasoline and certain special fuels. The current 18 cents per gallon tax rate applies through June 30, 2025. The rate is increased to 21 cents per gallon from July 1, 2025 through June 30, 2026, to 24 cents per gallon from July 1, 2026 through June 30, 2027, and to 27 cents per gallon from July 1, 2027. Beginning July 1, 2029 and each July 1 thereafter, the excise tax will be adjusted; the annual adjustment will be based on the percentage change in the yearly average of the National Highway Construction Cost Index compared to the base year average, with the maximum allowed tax rate increase capped at one cent per net gallon of gasoline or special fuel. Miss. Laws 2025, HB 1, signed by the governor on March 27, 2025. North Carolina: The North Carolina Department of Revenue (NC DOR) issued a press release to notify taxpayers that it will begin administering the new Transportation Commerce Tax this year. The new tax applies to ride shares provided by taxis and transportation network companies (TNCs) starting July 1, 2025. The tax rate is 1.5% of gross receipts for exclusive ride services and 1% of gross receipts for shared ride services. Taxpayers, i.e., taxis and TNCs, must collect tax from their customers and file returns and remit tax due directly to the NC DOR. The NC DOR noted that taxpayers must register with them before July 1, 2025. Additional information on the new tax is available on the NC DOR's website. Utah: Approved Joint Resolution (SJR 2) proposes an amendment to the Utah Constitution that would require certain initiated legislation subject to a vote after November 1, 2026, be approved by 60% of those voting on the legislation. This requirement would apply to initiated legislation (e.g., a ballot measure) that includes: (1) the imposition of a new tax, (2) an expansion of an existing tax to include additional items or transactions subject to tax, (3) an increase to an existing tax rate, or (4) for property tax, a change to the tax rate that would cause the tax rate to decrease less than it would under current law. SJR 2 directs the Lieutenant Governor to submit the proposal to voters. If it is approved voters, the proposed change would take effect on November 23, 2026. SJR 2 was enrolled with the Lieutenant Governor's office on March 13, 2025. Federal: On March 26, 2025, President Trump announced 25% additional tariffs on imports of automobiles and automobile parts to protect the national security of the United States (US). The 25% ad valorem tariff is in addition to any other duties, fees, exactions and charges applicable to the automobiles and automobile parts. The tariffs are declared under several authorities, including Section 301 of title 3, United States Code, Section 604 of the Trade Act of 1974, and Section 232 of the Trade Expansion Act of 1962. (See the White House Proclamation, "Adjusting Imports of Automobiles and Automobile Parts Into the United States," and accompanying Fact Sheet.) For more on this development, see Tax Alert 2025-0767. Federal — International: The March 2025 edition of Trade Talking Points is now available. Topics discussed in this edition include: United States (US) tariff developments; resuming United Kingdom (UK)-India trade talks; European Commission's Omnibus Packages; implications of UK and European Union (EU) retaliatory divergence for Northern Ireland; and UK, EU and US trade remedies. A copy of the March 2025 edition of Trade Talking Points, is available via Tax Alert 2025-0777. International — South Africa: On March 14, 2025, the South African National Treasury issued amendments to 2019 regulations for the purposes of defining "electronic services" under section 1 of the Value-Added Tax (VAT) Act. These amendments to the electronic services regulation are crucial in determining whether foreign suppliers of electronic services must register for and levy VAT. The amendments took effect on April 1, 2025, and encompass the following changes: (1) revise the definition of "electronic services" to exclude supplies made by foreign nonresidents who supply exclusively to VAT registered vendors; (2) amend the intermediary rules to allow nonresidents to utilize an intermediary as principal for electronic services purposes, irrespective of their VAT-registration status or liability; (3) introduce a more restrictive exclusion for intragroup supplies where services consumed by the local group entity must also be devised, developed, created or produced specifically for consumption by the local resident entity. For more on this development, see Tax Alert 2025-0709. Thursday, May 8. Sustainability Tax webcast series: 100 days in: US federal and state sustainability tax policy update (1 pm ET). In the latest installment of our Sustainability Tax webcast series, we discuss the status of federal and state sustainability tax policies 100 days into the Trump administration. We'll focus on the current state of the US incentives landscape — including the Inflation Reduction Act and the Infrastructure Investment and Jobs Act — as well as future considerations for this legislation. Panelists also will examine emerging climate-related actions taken by the states, including new state climate superfund regimes, climate disclosure laws and extended producer responsibility programs. Our speakers will highlight the challenges that these new policies create for businesses. 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. 1 Matter of Jefferies Group LLC & Subsidiaries, DTA Nos. 829218 and 829219 (N.Y. Tax App. Trib. February 20, 2025). 3 See HB 1681, which has been referred to the House Ways & Means Committee, and SB 265, which has been referred to the Senate Finance Committee. 4 For a discussion on the changes affecting marketplace providers, see EY Tax Alert 2024-1861 (October 10, 2024). 7 This ETA does not apply to transactions to which RCW 82.04.050(8)(b) applies — i.e., services provided exclusively in connection with the seller's sale of digital goods, digital codes or digital automated services. 8 Local taxing jurisdiction includes statutory local government, special districts, requesting home rule jurisdictions and self-collecting home rule jurisdictions. Document ID: 2025-0933 |
