27 March 2026 State and Local Tax Weekly for March 20 and March 27 Ernst & Young's State and Local Tax Weekly newsletter for March 20 and March 27 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. Utah Governor Spencer Cox signed various legislation that imposes a new tax on targeted advertising in the state (SB 287), clarifies certain sales and use tax provisions applicable to online transactions (SB 162) and imposes an excise tax on certain entities that provide content harmful to minors (SB 73). Targeted advertising tax: Beginning January 1, 2027, SB 287 (enacted March 25, 2026) imposes an annual tax on entities that derive at least 50% of their gross receipts in a year from targeted advertising and:
SB 287 defines targeted advertising as a transaction in which a business entity delivers, by any means, an advertisement to an audience or individual on behalf of an advertiser in exchange for consideration, and employs the following practices to facilitate this transaction:
The law also describes how to calculate the tax and how to determine an applicable entity's gross receipts for the tax year derived from targeted advertising in the state. Sales and use tax clarifications: SB 162 (enacted March 23, 2026) clarifies certain sales and use tax provisions. The law clarifies that sales and use tax is imposed on amounts paid or charged for:
The law adds a definition of "seller-hosted prewritten computer software" to mean "prewritten computer software that is accessed through the internet or a seller-hosted server, regardless of whether: (a) the access is permanent; or (b) any downloading occurs." The law also clarifies that the exemption from sales and use tax applies to amounts paid or charged for a transaction subject to the multi-channel video or audio service tax. Excise tax on harmful content: Effective October 1, 2026, SB 73 (enacted March 19, 2026) imposes a new excise tax on commercial entities required to implement age verification systems (i.e., a "covered entity") in an amount equal to 2% of the sales price of the covered transaction. A "covered transaction" is defined as "amounts paid to or charged by a covered entity for access to digital images, digital audio-visual works, digital audio works, digital books, or gaming services, including the streaming of or subscription for access to [such items]" regardless of the delivery method or type of access (e.g., single use or subscription). The new tax will be administered, collected and enforced by the Utah State Tax Commission. A covered entity required to file a sales and use tax return will remit this tax on the same schedule as its sales and use tax filing. Penalties and interest will be imposed for failure to timely pay the tax or failure to file a return or statement. For more on this development, see Tax Alert 2026-0833. Georgia: New law (HB 1199) updates the state's date of conformity to the IRC as of January 1, 2026 (from January 1, 2025). Georgia decouples from select One Big Beautiful Bill Act provisions, including IRC Sections 174A, 179(e), 224 and 225. Georgia continues to decouple from several other federal provisions, including IRC Sections 168(k), 168(n), 179(d)(1)(B)(ii), while IRC Sections 163(j) and 174 continue to be treated as they were in effect before the 2017 enactment of the Tax Cuts and Jobs Act. These changes apply to tax years beginning on or after January 1, 2025. Ga. Laws 2026, Act 375 (HB 1199), signed by the governor on March 20, 2026. Massachusetts: The Massachusetts Department of Revenue on March 25, 2026, updated its guidance on the differences between the state corporate excise tax and federal tax law, listing federal deductions that are disallowed for state tax purposes. Disallowed deductions include, but are not limited to: (1) bonus deprecation allowed as a federal deduction under IRC Section 168(k); (2) foreign-derived deduction eligible income allowed as a federal deduction under IRC Section 250; (3) income, franchise and capital stock taxes imposed by foreign countries, states (including Massachusetts) and political subdivisions of states allowed as a federal deduction — examples of these other state/foreign taxes subject to addback include net income taxes, gross income taxes, margin taxes, business privilege taxes, capital stock taxes and net worth taxes. Mass. Dept. of Rev., Webpage "Differences Between MA State and Federal Tax Law for Corporate Excise" (last updated March 25, 2026). Michigan: The Michigan Department of Treasury (MI DOT) issued a revenue information bulletin to provide guidance on the state's research and development (R&D) tax credit available under the state's corporate income tax and the withholding tax. The bulletin provides an overview of the credit and who may claim it, describes qualifying Michigan R&D expenses and the base amount used in determining eligibility and calculating the credit, and discusses the process for claiming the credit, the tentative claim requirement and adjustments to the credit. The process for claiming the credit varies based on whether the claimant is a corporate income taxpayer or a flow-through entity subject to withholding. The bulletin includes several illustrative examples. Mich. Dept. of Treas., Revenue Administrative Bulletin 2026-4 (March 27, 2026). Utah: New law (HB 77) expands the definition of "Utah unrelated business income" for corporate franchise and income tax purposes to include unrelated business income allocated to Utah (the definition already included unrelated business income apportioned to Utah). HB 77 also removes the sunset date of the elective pass-through entity tax. Utah Laws 2026, HB 77, signed by the governor on March 23, 2026. Utah: New law (SB 60) reduces the corporate and individual income tax rates to 4.45% (from 4.5%). SB 60 takes effect on May 6, 2026, but applies retroactively to tax years beginning on or after January 1, 2026. Utah Laws 2026, SB 60, signed by the governor on March 23, 2026. Colorado: The Colorado Department of Revenue (CO DOR) issued guidance on rounding cash transactions due to the penny shortage caused by the federal government's ending of the production of the penny. The CO DOR said that for retailers choosing to round the transaction total (i.e., purchase price, state sales and state-administered local sales taxes and, if applicable, retail deliver fee) it will treat such rounding in the same manner as other fees, surcharges and discounts related to the method of payment. Rounding does not affect the purchase price, the calculation of sales tax or retail delivery fee due; rounding adjustments must be shown as a separate charge. If the total amount due ends in one, two, six or seven cents the amount due is rounding down to the nearest nickel. If the total amount due ends in three, four, eight or nine cents the amount due is rounding up to the nearest nickel. The CO DOR said this rounding only applies to cash payments of taxes or fees for which the CO DOR requires payment to the penny, and that resulting differences will not be due to or from the CO DOR. Instead, such differences will be charged off. This guidance also applies to the retail marijuana sales tax, the county lodging tax, the local marketing district tax, and to the following fees: retail delivery, prepaid wireless, daily vehicle rental and congestion impact. Colo. Dept. of Rev., Rounding Guidance for Retailers (March 2026). Idaho: New law (HB 583) expands provisions limiting the tax duties for short-term rental marketplaces to include the owner of a short-term rental. Effective July 1, 2026, if an owner of a short-term rental offers a short-term rental or vacation rental directly to an occupant without using a short-term rental marketplace, the owner must comply with the requirements imposed on a short-term rental marketplace. Short-term rental marketplaces are required to register with the state tax commission and to collect, report and pay local taxes imposed on the lodging operator or occupant of a short-term rental or vacation. Idaho Laws 2026, ch. 22 (HB 583), signed by the governor on March 16, 2026. Missouri: In response to a ruling request, the Missouri Department of Revenue said that an online vendor of novel medical equipment kits is responsible for collecting sales tax on sales of kits to physicians' offices and pharmacies as these kits do not qualify for a resale exemption. The online vendor, however, will not have to collect sales tax on the kits if (1) they are the kind of drug that can only be dispensed by a licensed pharmacist upon prescription of the drug to a patient by a licensed practitioner, or (2) the vendor accepts in good faith a Sales and Use Tax Exemption Certificate from a pharmacy that intends to resell the kits. Mo. Dept. of Rev., LR 8383 (February 26, 2026). Washington: New law (HB 2334) provides guidance on rounding cash transactions due to the penny shortage caused by the federal government's ending of the production of the penny. Effective June 11, 2026, unless the buyer has the exact change for the total price or charge due (including sales tax) for an in-person cash transaction, the seller may round the amount due to the nearest amount divisible by five cents as follows:
These rounding rules only apply to in-person, cash transactions. The rules do not apply to payments made by check, credit card, money order, debit card, electronic payment or similar instruments. If the transaction is mixed, rounding only applies to the portion of the transaction paid in cash. Rounding does not alter the sales price or the amount of tax owed or collected. Those selling goods or services must calculate and remit taxes and fees based on the sales price before any rounding. B&O tax does not apply to amounts received from rounding up. Likewise, a deduction from B&O tax is not allowed for rounding down. Wash. Laws 2026, ch. 138 (HB 2334), signed by the governor on March 23, 2026. Georgia: New law (HB 1199) caps the aggregate annual amount of tax credits allowed for qualified low-income buildings at $100 million for tax years 2026 through 2028. This change applies to all tax years beginning on or after January 1, 2026. Ga. Laws 2026, Act 375 (HB 1199), signed by the governor on March 20, 2026. Iowa: The Iowa Economic Development Authority (Authority) adopted new administrative code provisions, new 261 — Ch. 82 "Research and Development Tax Credit Program," (new rules) to describe procedures applicable to the new research and development (R&D) tax credit program created in 2025 (see Tax Alert 2025-1123). To be eligible for certification as a qualified business, a business must meet all of the criteria set forth in Iowa Code Section 15.222. A foreign business also must show that it is not associated with a foreign adversary or foreign adversary entity. Qualified businesses must apply to the Authority for certification as a qualified business; the application must include certain information. The new rules describe the Authority's ability to review and revoke credit certifications, and they provide guidance on applying for the tax credit (annual applications are required), and the process and procedures an independent CPA will follow to verify an applicant's eligible expenditures. The new rules also describe how to calculate the tax credit and the adjusted credit, providing examples of the calculation. A qualified business is required to notify the Authority of any reductions to the federal credit for increasing research activities under IRC Section 41 or reduction of qualified research expenditures for the federal credit occurring after certification as a qualified business. Following notification to the Authority of a reduction in the federal credit, a qualified business is required to submit a supplemental verification of eligibility expenditures by an independent CPA. In addition, the Authority may reduce or eliminate some or all of an approved tax credit if a qualified business closes a facility in Iowa or experiences a mass layoff. The new rules become effective on April 22, 2026. Iowa Admin. Bulletin, Vol. XLVIII, No. 20 (March 18, 2026). Oklahoma: New law (HB 1427) expands the taxes for which the credit for investments in qualified clean-burning motor vehicle fuel property or in hydrogen fuel cells may be claimed against to include the banking privilege tax (this is in addition to the corporate income tax). This change takes effect November 1, 2026. Okla. Laws 2026, HB 1427, became law without the governor's signature on March 22, 2026. West Virginia: New law (SB 622) extends the sunset date of the West Virginia Innovative Mine Safety Technology Tax Credit Act through December 31, 2030 (from December 31, 2025). SB 622 takes effect on June 12, 2026. W.V. Laws 2026, SB 622, signed by the governor on March 27, 2026. Mississippi: New law (SB 3116) modifies the ad valorum tax exemption that a county board may grant for certain energy-related projects by expanding the definition of "project" to include a facility, placed in operation after April 16, 2021, that, "[stores] energy using battery energy storage systems, whether standalone or co-located with a renewable generation facility." (This is in addition to such facility generating energy through the use of a renewable energy source such as wind, water, biomass or solar. ) Under this provision (Miss. Code Section 27-31-46), a county board may exempt up to 50% of the total assessed value of the project. County boards and municipal authorities also may grant an ad valorem tax exemption to battery energy storage system facilities. The exemption granted under this provision (Miss. Code Section 27-31-101) may be for a total period not to exceed 10 years. SB 3116 takes effect July 1, 2026. Miss. Laws 2026, SB 3116, signed by the governor on March 16, 2026. Rhode Island: The Rhode Island Department of Revenue (RI DOR) issued guidance on non-owner-occupied property tax. The tax, which is effective July 1, 2026, is imposed on properties assessed over $1 million that are not the property owner's primary residence. The RI DOR created a "Non-Owner-Occupied Property Tax" webpage and issued FAQs on the tax. The FAQs cover general questions (such as what is the tax and what is it's rate, how to determine the assessed value, and applicable exemptions) and explain who is responsible for the tax if property is transferred during the transition year of July 1, 2025 through June 30, 2026, and who is responsible for the tax for property transferred in a privilege year beginning on or after July 1, 2026. R.I. Dept. of Rev., ADV 2026-09 "Guidance Regarding the Non-Owner-Occupied Property Tax" (March 16, 2026). Idaho: New law (HB 733) establishes provisions for reporting federal partnership audit and adjustments and modifies the time period in which taxpayers have to notify the tax commissioner of an adjustment of federal or state tax liability. As revised, taxpayers have 180 days (from 120 days) from the date of a final determination to notify the Idaho state tax commission of any deficiency or refund of federal taxes or another state income tax to which the credit for taxes paid to another state applies. Generally, taxpayers have 180 days to file an amended return and pay any Idaho tax due with respect to a final federal adjustment arising from an audit, except for final federal adjustments arising from a partnership level audit or administrative adjustment request. The new rules for reporting federal partnership audits and adjustments require that within 90 days after the final determination date of a final federal adjustment, a partnership must file a completed federal adjustments report with the Idaho state tax commission, notify each of its direct partners of their distributive share of the final federal adjustment (including information required by the state tax commission), and file an amended composite return or withholding return for direct partners and pay the additional amount required. Within 180 days after the final determination date, each direct partner must file a federal adjustment report reporting the adjustment to their distributive share and pay additional state tax, penalty and interest due. Alternatively, an audited partnership can make an irrevocable election to file a federal adjustments report and pay tax, penalty and interest due. An electing partnership will have 90 days to file a completed federal adjustment report and notify the Idaho state tax commission that it is making the election. The electing partnership will have 180 days after the final determination date to pay a determined amount for its direct and indirect partners. These reporting and payment provisions apply to direct and indirect partners of an audited partnership that are tiered partners. An audited partnership or tiered partner may enter into an agreement with the Idaho state tax commission to use an alternative reporting and payment method, if it demonstrates that the requested alternative method will reasonably provide for the reporting and payment of tax, penalty and interest due. The law also (1) sets forth the period in which the tax commission can assess additional tax, interest and penalties arising from a federal adjustment; (2) allows taxpayers to make estimated Idaho tax payments during the course of a federal audit; and (3) describes the process for claiming refunds or credits of tax arising from final federal adjustments. HB 733 takes effect on July 1, 2026. Idaho Laws 2026, ch. 81 (HB 733), signed by the governor on March 20, 2026. Idaho: New law (SB 1345) expands the options available to the Idaho state tax commission to communicate certain tax-related documents to include secure electronic communication. This option is not automatic; rather, taxpayers must make an election to receive tax-related documents and other information through secure electronic communication. For instance, the tax commission can deliver a final decision or notice of levy and distraint through secure electronic communication. SB 1345 takes effect on July 1, 2026. Idaho Laws 2026, ch. 153 (SB 1345), signed by the governor on March 26, 2026. California: Recently enacted legislation updating California's conformity to the Internal Revenue Code (IRC). SB 711 (the Conformity Act of 2025) advances California's general IRC conformity date from January 1, 2015, to January 1, 2025, effective for tax years beginning on or after January 1, 2025. While this change aligns California with many federal tax law developments enacted over the past 10 years, the state continues to apply a selective, static conformity approach and maintains significant areas of nonconformity, including the compensation and benefits provisions contained in the One Big Beautiful Bill Act (P.L. 119-21, OBBBA). The chart in Tax Alert 2026-0665 lists the compensation and benefits provisions under the OBBBA to which the California tax code does not conform for California personal income tax purposes. Colorado: The Colorado Department of Revenue has adopted Rule 39-22-604-4 (1 CCR 201-2) clarifying the written notice employers must provide to employees regarding certain federal and state refundable income tax credits (Earned Income Tax Credit or "EITC notices"). The rule specifies that employers must provide either Form DR 0995, Notice of Federal and State Refundable Tax Credits or the entire written content of Form DR 0995, and clarifies that providing only a hyperlink does not satisfy the statutory notice requirement. For additional information on this development, see Tax Alert 2026-0649. Louisiana: The Louisiana Department of Revenue (Department) has updated regulations governing the time nonresidents can work in the state without triggering the state income tax and withholding requirement to conform to legislation enacted in 2025 under HB 567. The law change increased the threshold for nonresident employee income tax and withholding from 25 to 30 days, effective January 1, 2026. Under the updated law, employers are not required to withhold Louisiana nonresident income tax from wages paid to employees who perform services within the state for 30 or fewer days in the calendar year. If the working days in the calendar year exceed 30, the employer is required to remit and withhold nonresident income tax from all wages for services performed within the state, including wages earned for the first 30 days. Changes to the regulations do the following: (1) expand the exemption period for nonresident employees from 25 days to 30 days per calendar year; (2) require employers to begin withholding Louisiana income tax starting on the 31st day a nonresident employee performs services in Louisiana during the calendar year; and (3) remove prior provisions that tied the exemption to federal law or the employee's home-state rules. Nonresident individuals with other Louisiana-source income remain subject to Louisiana income tax filing requirements regardless of the number of days worked in the state. The updated regulations are effective March 20, 2026. For additional information on this development, see Tax Alert 2026-0770. New York: Under the Trapped at Work Act, enacted in 2025 (A.584-C) and amended in 2026 (A.9452), employers are prohibited from requiring workers to repay them if the employment relationship ends before a stated period. The law allows only the following categories of repayment obligations, and only if all statutory conditions are satisfied: (1) tuition repayment for a transferable credential, subject to strict statutory conditions, including a separate agreement, transferability, a cost cap, prorated repayment and no repayment upon termination except for misconduct; (2) payment for employer property voluntarily sold or leased to the worker, if not tied to continued service; (3) repayment of certain non-educational incentives only where expressly permitted by statute, generally limited to cases of termination for misconduct; and (4) obligations related to sabbatical leaves for educational personnel and arrangements established through a collective bargaining agreement. The law is effective December 19, 2026. For more on this development, see Tax Alert 2026-0724. Chicago, IL: A nonprofit trade association whose members engage in electronic commerce has filed a complaint for declaratory judgment and injunctive relief, challenging the constitutionality of Chicago's recently enacted social media amusement tax (SMAT). Starting January 1, 2026, the SMAT is imposed on for-profit social media businesses that provide individuals with access to social media and collect consumer data on more than 100,000 Chicago consumers in a calendar year. (For more on the SMAT, see Tax Alert 2026-0377.) The trade association is arguing that the SMAT: (1) is preempted by the Internet Tax Freedom Act, which prohibits state and local governments from imposing discriminatory taxes on electronic commerce; (2) violates the Illinois constitution as an unauthorized occupation tax — i.e., it is imposed on the business of operating a social media website; (3) violates the First Amendment of the U.S. Constitution because of its selective taxation of the media; and (4) it violates the Commerce Clause of the U.S. Constitution because the tax is not fairly apportioned. The trade association is seeking to have the SMAT declared invalid and its collection enjoined. NetChoice v. City of Chicago, Case No. 2026CH02417 (filed with Cook Cnty. Ill. Cir. Ct., on March 13, 2026). Mississippi: New law (HB 1664) establishes the Mississippi Video Service Act, provisions of which require a video service provider offering video service in a political subdivision under a certificate of franchise authority to pay the political subdivision a video service provider fee. The amount of the fee is a percentage of the video service provider's gross revenue (which is defined by the law); the percentage is determined by the political subdivision. If there is an incumbent video service provider in the political subdivision, the fee imposed on a video service provider is the lesser of the amount equal to the percentage of gross revenue paid by the incumbent or the maximum allowed under federal law (47 USC Section 542). If there is not an incumbent video service provider, the political subdivision may establish a video service provider fee in amount not in excess of the maximum allowed under federal law. The percentage of gross revenue applies equally to all video service providers in a political subdivision. The law prohibits a fee from being imposed on any video service customer except under a valid franchise or certificate of franchise authority. A video service provider fee or change to the percentage level of an existing fee can take effect 90 days after the required notice is given to the video service provider. HB 1664 took effect from and after its passage. Miss. Laws 2026, HB 1664, signed by the governor on March 19, 2026. South Dakota: New law (HB 1038) allows the Public Utilities Commission to charge a public utility customer the actual costs of reviewing a request to approve a contract with deviations or other electric service agreement with a public utility, related to providing electric service to a data center with peak demand of at least 10 megawatts. For purposes of this provision, a "data center" is defined as a "centralized repository for the primary purpose of storage, management, dissemination, and processing of electronic data and information, including the mining of digital currency." HB 1038 takes effect July 1, 2026. S.D. Laws 2026, HB 1038, signed by the governor on March 24, 2026. Utah: New law (HB 77), among other changes, creates new code section, Utah Code Section 59-4-103, to exempts certain uses or possession of property from the state's privilege tax. For example, the privilege tax does not apply to the use or possession of: (1) inventory or other tangible personal property held for sale that is exempt from the property tax under Utah Code Section 59-2-1114; (2) property that is a concession in, or relative to, the use of public airport, park, fairground or similar property available to the use of the general public; (3) property by a religious, education or charitable organization; (4) public land occupied under the terms of an agricultural lease or permit issued by the federal government; (5) public property as a tollway by a private entity through a tollway development agreement; (6) certain leases, permits or easements; among other uses or possessions. This provision takes effect on May 6, 2026. Utah Laws 2026, HB 77, signed by the governor on March 23, 2026. Washington: New law (HB 2089) eliminates a business and occupation (B&O) tax deduction for high volume mortgage lenders on loans primarily secured by first mortgages or trust deeds on non-transient residential properties effective July 1, 2026. A high-volume lender is defined as either being a specified financial institution as defined in RCW 82.04.29004, or having annual closed mortgage origination volume of at least $10 billion in the prior calendar year. HB 2089 eliminates the requirement that the lender is not located in more than 10 states. Wash. Laws 2026, ch. 131 (HB 2089), signed by the governor on March 23, 2026. Washington: New law (SB 6244) extends until January 1, 2038 (from January 1, 2028), the exemption from the hazardous substance tax for certain agricultural crop protection products that are temporarily warehoused in Washington but not otherwise used, manufactured, package or sold in the state. SB 6244 takes effect on June 11, 2026. Wash. Laws 2026, ch. 164 (SB 6244), signed by the governor on March 23, 2026. International — Argentina: On March 6, 2026, Argentina enacted Law No. 27,802 (referred to as the Labor Modernization Law or the Law) through publication in the Official Gazette. Although the Law primarily introduces labor law reforms, it also incorporates significant tax amendments affecting income tax, value-added tax (VAT) and excise taxes, with the stated objective of reducing taxes in certain sectors and introducing technical adjustments aligned with current economic conditions. Specifically, the Law reduces the VAT rate to 10.5% for electricity used in agro-industrial irrigation systems, with the objective of lowering energy costs for the agricultural sector. This measure applies from April 1, 2026. For additional information on the other changes in the Law, see Tax Alert 2026-0703. International — Ghana: On January 29, 2026, the Court of Appeal of Ghana delivered its judgment in Republic v. Commissioner-General, Ghana Revenue Authority, Ex Parte application at the High Court in the first instance, holding that corporate income tax refunds are governed by the Revenue Administration Act, 2016 not the Value Added Tax Act, 2013, Act 870 (VAT Act) (now repealed), and that taxpayers are entitled to refunds for VAT overpayments under Sections 50(3) to (9) of the VAT Act, even if they do not qualify as exporters. For more on this development, see Tax Alert 2026-0662. International — Netherland: With effect from April 1, 2026, non-European Union (EU) businesses may no longer file hard-copy (i.e., paper) requests to reclaim Dutch input value-added tax (VAT). Instead, they must file these refund requests via the Dutch tax authorities' portal website. Businesses must avail themselves of either a DigiD certification or eHerkenning (electronic recognition) to be able to do so. All further communication will also take place via this portal website. Note that, for nonresident businesses, the process of obtaining this certified access can be long and cumbersome. Therefore, nonresident businesses may want to involve a specialized (resident) agent to file any Dutch VAT refund claims in the name of and on behalf of the business. For additional information on this development, see Tax Alert 2026-0713. 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. Document ID: 2026-1226 |
