18 September 2025 State and Local Tax Weekly for August 1 and August 8 Ernst & Young's State and Local Tax Weekly newsletter for August 1 and August 8 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. On June 30, 2025, New Jersey enacted its budget for Fiscal Year 2026 (A.5804, the law). In response to ongoing budget deficits and revenue shortfalls, the law makes significant changes to the state's realty transfer tax regime for high-value property sales.1 The law took effect on, and applies to transfer made on or after, July 10, 2025. There are two components to New Jersey's real estate transfer taxes imposed on recorded instruments: (1) the Realty Transfer Fee, and (2) the Supplemental Fee to the Realty Transfer Fee (previously known as the "Mansion Tax" and will now be known as "the Graduated Percent Fee"). The law makes no changes to the Realty Transfer Fee, but does amend the "Mansion Tax" for certain realty transfers in excess of $1 million. Historically, the "Mansion Tax" was borne by the buyer and imposed on the following taxable property classes:
Additionally, the Mansion Tax was imposed on controlling interest transfers, which applied to transfers of real property classified as "4A commercial" property if the consideration or valuation of the real property was greater than $1 million. The law renames the historic Mansion Tax to the Graduated Percent Fee and increases the rates for certain transactions and properties subject to transfer tax from 1% to rates ranging from 1% to 3%. The applicable rate is based on the total consideration of transfers over $1 million,2 as detailed in the chart below. The law also shifts the legal responsibility for paying the tax/fee to the seller. The rates below are imposed on the entire consideration of the transaction, not on a graduated basis. As such, a transfer of $10 million will be subject to transfer tax at the flat rate of 3.5% with respect to the Graduated Percent Fee. The consideration or sale price range is as follows:
As a result of the law, a real estate transaction involving the recorded transfer of certain real estate in excess of $1 million in New Jersey could be subject to transfer tax at a combined rate of 4.71%. For instance, a transfer of a residential property with a fair market value of $3.5 million or more will be subject to the Realty Transfer Fee with a graduated rate of 1.21% and the Graduated Percent Fee based on the consideration which is imposed at a rate of 3.5% for a combined total rate of 4.71%. Notably, the controlling interest transfer tax is limited to the Graduated Percent Fee at a maximum rate of 3.5%. The law also includes a transitional refund provision. Sellers who executed a binding contract before July 10, 2025, and record the deed on or before November 15, 2025, are eligible to claim a refund for any portion of the graduated fee that exceeds 1%. To do so, the seller must submit Form RTF-3 to the New Jersey Division of Taxation within one year of the deed's recording date. For additional information on this development as well as a discussion of realty transfer tax and recordation fee updates in Pennsylvania, the City of Philadelphia and Rhode Island, which were discussed in previous newsletters, see Tax Alert 2025-1650. California: The California Franchise Tax Board (FTB) issued a legal ruling discussing the treatment of Deferred Intercompany Stock Account (DISA) in certain nonrecognition transactions. The FTB noted that this ruling will be of interest to taxpayers in combined reporting groups where there is a DISA with respect to a member corporation's stock and the stock is transferred in a Section 355 nonrecognition transaction. Cal. FTB, Legal Ruling 2025-01 (July 30, 2025). California: New law (AB 1518) makes permanent certain provisions allowing nonresident aliens to elect to file group returns instead of individual returns; otherwise these provisions would have only been in place for tax years beginning on or after January 1, 2021 and before January 1, 2026. The law allows nonresident aliens who are not eligible for, or have not been issued, a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN) to elect to file a group return instead of an individual return for taxable income received for services that take place in California. As a result, the nonresident alien who receive California-source income can make the election without having to provide an SSN or an ITIN. The election also can be made by an entity authorized by the taxpayer to file on his or her behalf. The tax rate for each nonresident alien making the election will be the highest marginal individual income tax rate(s). If the electing nonresident alien would be subject to the mental health tax when filing individually, an additional 1% tax rate will apply. Further, a nonresident alien making the election to join in a group return will not be allowed any deductions or credits, except for taxes withheld under the California State Unemployment Insurance Code. The nonresident alien taxpayer, or an entity authorized by the taxpayer to file on his or her behalf, is responsible for making the requisite payments of tax, interest and penalties. In addition, a nonresident alien's gross income does not include any payments made by an entity authorized by nonresident alien taxpayers to file on their behalf. The FTB may adjust the income of an electing nonresident alien taxpayer included in a group return to properly reflect income. Cal. Laws 2025, ch. 73 (AB 1518), signed by the governor on July 28, 2025. Maine: New law (LD 554), effective for tax years beginning on or after January 1, 2025, allows certain corporations and individuals to deduct from taxable income/federal adjusted gross income an amount equal to any gain recognized by the taxpayer on the sale of an ownership interest greater than 50% in a qualified business if the business provides housing and was transferred to a cooperative affordable housing corporation or a municipal housing authority or its affiliate. The deduction may not exceed $750,000. For purposes of this deduction, a "qualified business" is a business whose securities are not publicly traded on any stock exchange and is registered with the Secretary of State or whose principal place of business is within Maine. Maine Laws 2025, ch. 455 (LD 554), signed by the governor on July 1, 2025. North Dakota: The North Dakota Tax Department's Income Tax & Withholding legislative recap discusses federal income tax provisions in H.R. 1 "One Big Beautiful Bill Act" (OBBBA) (P.L. 119-21) that impact North Dakota individual income tax. The Department explained that because the starting point for computing North Dakota income tax is tied to the computation of federal taxable income, federal changes to income or deductions made by OBBBA automatically flow through and impact the computation of North Dakota taxable income. Changes to federal tax credits, however, do not have a direct impact on the computation of North Dakota taxable income. Further, North Dakota individual income tax rates and brackets are set by state law and are not changed. N.D. Tax Department, "Legislative Recaps from the Office of State Tax Commissioner: July 2025 — Income Tax & Withholding Recap" (July 2025). California: The California Department of Tax and Fee Administration (CDTFA) announced that the Office of Administrative Law approved the CDTFA's amendments to regulation 1684.5 "Marketplace Sales" to make the regulation consistent with Cal. Rev. & Tax Code Section 6041.6. The amendments incorporate definitions related to vehicle renter brokers, defining a "vehicle rental broker" as "a person that facilitates, for a commission, fee, or other consideration, passenger vehicle rentals through an online marketplace owned, operated, or controlled by the person or a related person. A person that is a vehicle rental broker is not a marketplace facilitator with respect to the facilitation, for a commission, fee, or other consideration, of a passenger vehicle rental on behalf of a rental company that is not a related person." The amendments also incorporate definitions of the following terms: "optional accessory", "passenger vehicle", "passenger vehicle rental" and "rental company." (Cal. Reg. Notice Register 2025, Vol. No. 30-Z, July 25, 2025). Florida: The Florida Department of Revenue issued a tax information publication explaining that legislation enacted in 2025 prohibits any increase to the local communications services tax (CST) rates in effect as of January 1, 2023 before January 1, 2031. In addition, any increase to the discretionary sales surtax under Fla. Stat. Section 212.055 may not be added to the local CST before January 1, 2031. These prohibitions had been set to end on December 31, 2025. Fla. Dept. of Rev., TIP No. 25A 19-01 (July 22, 2025). Hawaii: The Hawaii Department of Taxation issued a tax information release (TIR) to clarify the general excise tax (GET) obligations of transportation network companies (TNCs) and TNC drivers. For purposes of HRS Section 237-4.5, a TNC is a marketplace facilitator and is subject to GET on gross income or gross proceeds of sale (i.e., the total amount collected from a passenger), except for the discretionary tip given to the TNC driver. The GET imposed on the TNC is the 4% retail rate plus the county surcharge. For purposes of HRS Section 237-4.5, a TNC driver is a marketplace seller and is subject to GET on its gross income or gross proceeds of sale at the 0.5% wholesale rate. GET also is imposed on discretionary tips at the 4% retail rate plus the county surcharge. The person who ultimately receives the tip is subject to the GET. If the tip is split between the TNC and the TNC driver, both are subject to GET on their respective portion of the tip. The TIR explains when a tip is discretionary versus mandatory and includes examples. Mandatory tip payments are considered part of the gross income or gross proceeds of the sale. In regard to mandatory tips, the TNC is subject to GET at the retail rate on the full amount of the tip, while the TNC driver is subject to the GET at the wholesale rate on the portion of tip they receive. Haw. Dept. of Taxn., Tax Information Release No. 2025-01 (July 30, 2025)(supersedes TIR 2018-01 and supplements TIR 2019-03). Hawaii: The Hawaii Department of Taxation issued a tax information release to provide guidance on the general excise tax (GET) exemption for amounts received by certain healthcare providers for healthcare-related goods and services purchased under Medicare, Medicaid or TRICARE. Eligible health care providers include hospitals, infirmaries, medical clinics, health care facilities, pharmacies, licensed physicians, osteopathic physicians, licensed dentists, licensed advanced practice registered nurses, and licensed pharmacists. The exemption applies to amounts received directly from Medicare, Medicaid or TRICARE and amounts received from patients, including deductibles, copayments and coinsurance provided that the healthcare related goods and services are covered by Medicare, Medicaid or TRICARE programs. Taxpayers are required to report gross receipts received from healthcare related goods and services purchased under these programs. Haw. Dept. of Taxn., Tax Information Release No. 2025-02 (August 1, 2025). New York: The New York Department of Taxation and Finance (NYDTF) issued a tax bulletin discussing the application of sales tax on the charge for hotel and short-term rental unit occupancy. Hotels, short-term rental units and booking services are required to collect sales tax on the charge for occupancy when the rental rate is more than $2.00 per day. Short term rental unit operators not using a booking service do not have to collect the tax when the rental unit is its own property and is rented out for three or less days during the calendar year. Further, a booking service that facilitates sales of short-term rental unit occupancy in New York for an operator is required to collect sales tax on the occupancy charge for that unit. For purposes of these sales, a booking service does not include a room remarketer. The bulletin also discusses the following topics: (1) hotel and short-term rental unit occupancy; (2) New York City unit fee; (3) local occupancy taxes (e.g., bed taxes); (4) other charges (e.g., parking fees, service fees, rental fees, pet fees, cleaning fees); (5) permanent residents outside and inside New York City; (6) complimentary occupancy; and (7) exempt purchasers (e.g., exempt organizations, government employees, veterans posts). The bulletin describes hotels (e.g., hotel, motel, inn, bed and breakfast, ski lodge, apartment hotel) and short-term rental unit (e.g., house, apartment, condominium, cooperative unit, cabin, cottage, bungalow, furnished living unit). N.Y. Dept. Taxn. and Fin., Tax Bulletin ST-331 (July 30, 2025). Wisconsin: The Wisconsin Department of Revenue (WI DOR) in its July tax bulletin explained that the entire sales price of a taxable product, including any separate charges for tariffs, is subject to sales or use tax. The WI DOR noted that listing the tariff separately on the importer's sales invoice or billing the consumer separately does not change the sales tax treatment. Further, if the importer does not collect the sales or use tax on the sales price, the consumer is liable for use tax on the purchase price, which includes any tariff charges the importer collected from the consumer. When the importer is also the consumer, tariffs they directly or indirectly paid to the customs authority are not subject to sales or use tax. Wis. Dept. of Rev., Wisconsin Tax Bulletin No. 230 (July 2025). Maine: New law (LD 1951) expands eligibility and limitations for the major food processing and manufacturing facility expansion tax credit for tax years beginning on or after January 1, 2027. As of that date, a certified applicant is allowed a credit against income tax in an amount equal to 2% of the credit applicant's qualified investment. Taxpayers may not claim this credit for more than 20 years. The cap on the amount of credit that can be issued by the commissioner is increased to $200 million (from $100 million) of qualified investment or any individual certificate of approval for more than $100 million (from $85 million) of qualified investment. LD 1951 also expands the list of information a certified application must include in the report it is required to file with the commissioner, including the total number of full-time employees based in Maine, the number of jobs they offered during the report year above the base level of employment, and the number of jobs that have been added since the issuance of the certificate of approval. LD 1951 takes effect 90 days after the legislative session ends. Maine Laws 2025, ch. 489 (LD 1951), signed by the governor on July 1, 2025. Maine: New law (LD 1275) amends the renewable chemicals tax credit by repealing certain eligibility requirements. Applicable to tax years beginning on or after January 1, 2026, taxpayers will no longer be required to demonstrate to the Department of Economic and Community Development that at least 75% of the employees of the contractors hired or retained to harvest renewable biomass used to produce renewable chemicals meet the eligible conditions specified in the Employment Security Law. Maine Laws 2025, ch. 477 (LD 1275), signed by the governor on July 1, 2025. Maine: The Maine Revenue Service (MRS) and the Department of Economic and Community Development (DECD) jointly adopted new Rule 816 "Dirigo Business Incentives Tax Credit." The new rule defines key terms (such as "eligible business property," "eligible capital investment," "eligible sector," "qualified employee training program," and "property used exclusively in the qualified business activity") and addresses the following topics: (1) taxpayers eligible for the credit; (2) the amount of credit allowed; (3) credit limitations, refundability and carryover of excess credit; (4) credit recapture and disallowance; and (5) information the taxpayer must provide when claiming the credit. The new rule took effect on August 2, 2025 and applies to tax years beginning on or after January 1, 2025. Maine: New law (LD 819) expands the definition of "qualified property" for purposes of the business equipment tax exemption under 36 MRSA Section 691 and "energy storage systems" for purposes of the reimbursement for taxes paid on certain business property under 36 MRSA Section 6652. As amended, qualified property includes, and reimbursements for energy storage systems may be made for, a battery storage system (system), if (1) more than 50% of the electrical output from the system serves load behind the utility meter where the system is located, or (2) there was a fully executed interconnection agreement between the system owner and a transmission and distribution utility by January 1, 2025. The law defines "battery storage system" as a "commercially available technology that uses mechanical, chemical or thermal processes for absorbing energy and storing it for a period of time for use at a later time, including … lithium-ion batteries." LD 819 applies to property tax years beginning on or after April 1, 2026. Maine Laws 2025, ch. 467 (LD 819), signed by the governor on July 1, 2025. New Hampshire: New law (HB 696) provides that an electric generating facility that is exempt from the utility property tax and makes a payment in lieu of taxes (PILOT) to the municipality under a PILOT agreement that was in effect as of July 1, 2027, is not liable for paying the statewide education property tax until the PILOT agreement expires or until July 1, 2032, whichever occurs first. Once the payment of the state education tax is required, such payment may be included in a new PILOT agreement or be paid in addition to a PILOT agreement that has not expired or been updated. State education tax paid separately from the PILOT is determined using the imputed value of the facility that is calculated and used by the New Hampshire Department of Revenue Administration for equalization purposes. The law also modifies the definition of "utility property" to exclude property used for the purpose of generating electricity, except such property owned by a public utility, that are engaged in the distribution or transmission of electricity. SB 696 takes effect on July 1, 2027, and applies to tax periods beginning on or after April 1, 2028. N.H. Laws 2025, ch. 206 (HB 696), signed by the governor on July 15, 2025. California: The California Attorney General (AG) opined that the Office of Tax Appeals (OTA) in adjudicating a challenge has the authority to evaluate whether the application of a tax regulation to the taxpayer's case would conflict with governing statutes and, if it determines that it would conflict, it may decline to apply such regulation in determining the taxpayer's tax liability. In so holding, the AG found that the Legislature had "generally conferred on OTA panels all adjudicative authority previously held by the Board of Equalization" (Board) and that at the time of the OTA's creation the Board had the authority to hear challenges to the application of its own regulations as well as regulations promulgated by the FTB. The AG said it found "no evidence that … the Legislature [in transferring the Board's statutory authority to hear taxpayer appeals to the OTA] intended to eliminate the authority to consider challenges to the application of tax regulations." Moreover, the Legislature's requirement that any amendments to the Board's jurisdictional regulations by the OTA be "consistent with" the 2006 Model Act governing administrative tax tribunals, is "further evidence of its intent for OTA panels … to hear statutory challenges to tax regulations." The AG noted that the OTA panels, in making a determination, must afford the appropriate deference to the view of the agency that promulgated the regulation, and that OTA panels do not have the "authority to apply their view of a regulation's validity outside the context of adjudication a taxpayer appeal." Lastly, the AG found that the OTA panel's adjudication of challenges to tax regulations does not conflict with the California Administrative Procedures Act or violate the California Constitution. Ca. Atty. Gen., Op. No. 23-701 (July 31, 2025). Louisiana: New law (HB 500) modifies various provisions related to the administration and adjudication of tax disputes. Under Louisiana law, an assessor is required to send a notice to the taxpayer informing them of the assessment and that they have the right to do any of the following: (1) within 60 calendar days from the date of the notice (a) pay the amount of the assessment, (b) appeal to the Board of Tax Appeals (BTA) for redetermination of the assessment, or (c) pay under protest and either file suit or file a petition with the BTA; or (2) within 15 calendar days from the date of the notice, agree in writhing with the collector to a mediation. If mediation is agreed to, mediation must be completed within 45 calendar days of the mediation agreement between the parties. The taxpayer/dealer or collector may terminate the mediation agreement by notifying the other party in writing. Once the mediation is completed or terminated, the collector must notify the taxpayer or dealer that they have 30 days from the date the notice is sent to take the action described in (1)(a)(b) or (c) above. Mediation procedures are nonbinding unless all parties agree otherwise. HB 500 also modifies Louisiana Uniform Local Sales Tax Board provisions. The law provides that any policy advice issued after January 1, 2025, "shall bind the decision or discretion of a local collector." A local collector has 20 days to seek a review of the policy advice by filing a petition with the Local Tax Division of the BTA. Policy advice that is appealed will be stayed until the appeal is resolved. HB 500 also requires the Local Tax Division to conduct a de novo review of the private letter ruling advice. A taxpayer or the local tax collector may appeal a judgment of the Local Tax Division. HB 500 took effect on upon becoming law. La. Laws 2025, Act 285 (HB 500), signed by the governor on June 11, 2025. California: The California Department of Tax and Fee Administration (CDTFA) announced that the Office of Administrative Law approved the CDTFA's amendments to and new regulations regarding Emergency Telephone Users Surcharge (ETUS) and Local Prepaid Mobile Telephony Services. The CDTFA adopted new regulation chapter 5.6 Emergency Telephone Users Surcharge Act (California Code of Regulations, title 18, (CCR), Sections 2435-2446), and amendments to regulation chapter 5.7 "Local Charges on Prepaid Mobile Telephony Services" (CCR, title 18, Div. 2, Sections 2460, 2461 and 2462). The CDTFA also repealed regulation chapter 5.5 "Emergency Telephone Users Surcharge Law" (CCR, title 18, Div. 2, Sections 2401, 2403, 2405, 2406, 2413, 2421, 2422, 2425, 2431 to 2433) as it is no longer needed because it was the prior ETUS regulations. These changes take effect on October 1, 2025. (Cal. Reg. Notice Register 2025, Vol. No. 30-Z, July 25, 2025). Colorado: In response to a ruling request the Colorado Department of Revenue (CO DOR) determined that unlimited voice minutes in a wireless carrier's prepaid wireless service plans do not meet the definition of "prepaid wireless telecommunications services" under C.R.S. Section 29-11-101(21) and, therefore, are not subject to the prepaid wireless 911, 988 and telecommunications relay services or telephone disability access charges. The CO DOR explained that the unlimited voice minutes do not meet the definition of prepaid wireless telecommunication services because these voice minutes will not decrement or decline with use in a known amount over the course of the service period. The CO DOR noted that this letter ruling does not address "the corresponding surcharges for other telecommunications service administered by the Public Utilities Commission (PUC) and local 911 governing bodies." Colo. Dept. of Rev., PLR 25-003 (June 24, 2025). Colorado: In response to a ruling request the Colorado Department of Revenue (CO DOR) said that a Colorado registered marketplace facilitator is not a vendor responsible for remitting the Colorado firearms and ammunition excise tax on the sale of firearms, firearm precursor parts or ammunition. For purposes of this tax, the vendor responsible for remitting the tax is a person doing business in the state as an ammunition vendor, firearms dealer, or a firearms manufacturer. Colo. Dept. of Rev., PLR 25-002 (June 17, 2025). New Jersey: New law (A. 5803) increases the annual tax imposed on online gaming, online sports wagering and the daily fantasy sports operating fee to 19.75% (from 15%, 13% and 10.5%, respectively), effective July 1, 2025. N.J. Laws 2025, ch. 66 (A. 5803), signed by the governor on June 30, 2025. Texas: New law (SB 711) provides a tax credit or refund for diesel fuel taxes paid on diesel fuel used in Texas by auxiliary power units (APU) or power take-off equipment (PTO) on any motor vehicle. (A similar credit/refund is already provided for gasoline used to operate such equipment.) The tax credit may be claimed by a license holder, while a person that does not hold a license may file a refund claim. If the quantity of the diesel fuel can be accurately measured by a metering or other measuring device or method, the comptroller may approve the use of such device as a basis for determining the quantity of the diesel fuel consumed in the operations of the APU or PTO for purposes of the credit or refund. If there is not a separate metering device or other approved measuring method, the amount of the credit or refund will be a percentage (as determined by the comptroller) of the diesel fuel consumed by each motor vehicle equipped with an APU or PTO. An air conditioning or heating system of a motor vehicle primarily provided for the convenience or comfort of the operator or passengers is not a PTO and as such a credit or refund will not be allowed for tax paid on any portion of the diesel fuel used for the air conditioning or heating system. A credit or refund also will not be provided for the portion of diesel fuel used for idling. SB 711 takes effect on September 1, 2025. Tex. Laws 2025, SB 711, became law without the governor's signature on May 24, 2025. Federal — International: The July 2025 edition of Trade Talking Points is now available via Tax Alert 2025-1614. Topics discussed in this edition of Trade Talking Points include the latest US trade policy announcements and updates to tariff schedules, UK and international trade updates including UK Government Trade Strategy, Canadian and European Union steel and trade remedies, and the Mercosur-European Free Trade Association free trade agreement. Federal - Brazil: United States (US) President Trump issued an Executive Order on July 30, 2025, imposing a 40% ad valorem duty on Brazilian-origin imports, effective August 6, 2025. The additional tariff stacks with existing tariffs (except Section 232) and excludes specific products such as civilian aircraft, aluminum, energy products and select agricultural goods. For more on this development, see Tax Alert 2025-1632. Federal: United States (US) President Trump signed an Executive Order on July 30, 2025 suspending duty-free de minimis treatment for low-value shipments valued at no more than US$800, subjecting these shipments to all applicable duties. Starting on August 29, 2025, all imported goods that typically qualify for the de minimis exemption will be subject to applicable duties, calculated either as ad valorem or specific duties based on the country of origin.For additional information on this development, see Tax Alert 2025-1633. Federal: On June 30, 2025, United States (US) President Donald Trump signed a Proclamation titled "Adjusting Imports of Copper into the United States," which imposes 50% tariffs, effective August 1, 2025, on imports of semi-finished copper products and copper-intensive derivative products The tariffs apply specifically to a product's copper content. For additional information on this development, see Tax Alert 2025-1634. Federal: United States (US) President Trump issued an Executive Order on July 31, 2025 imposing additional ad valorem duties on goods from certain trading partners, effective August 7, 2025. Businesses should monitor trade developments, assess supply chain impacts, and consider strategies such as valuation planning, duty deferral and contract reviews to manage compliance and cost exposure. For additional information on this development, see Tax Alert 2025-1640. 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.
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