State and local tax (SALT) landscapes continued to shift throughout the second quarter of 2025. From changes in income and sales tax structures to new incentives and updates to sourcing rules, jurisdictions across the country are actively reshaping their fiscal frameworks.

This summary highlights the most impactful SALT developments from the second quarter, offering timely insights to support compliance, planning and strategic decision-making in a dynamic regulatory environment.

Northeast

Maryland

  • Maryland Expands Sales Tax to Data & IT Services: Effective July 1, 2025, Maryland has implemented a new 3% sales and use tax on a broad range of digital and technology services under HB0352.

Massachusetts

  • Nonresident Stock Gain Taxation: The Massachusetts Appeals Court upheld the taxation of gains received by a nonresident on stock from a company founded while the nonresident resided in the state.
  • Technical Information Release on Amended Research Credit Claims: The Massachusetts Department of Revenue (DOR) issued guidance to assist financial institutions filing amended returns to claim the state research credit.

New York

  • Internet Activities Rule: A New York state trial court upheld the rule and adopted portions of the Multistate Tax Commission’s (MTC) revised P.L. 86-272 guidance, including treatment of online activities like cookie-based data collection and post-sale digital services as nexus-creating.
  • Matter of Dynamic Logic v. Tax Appeals Tribunal: In New York, ad measurement services are now deemed taxable information services due to data reuse in benchmarking.
  • FY 2026 Budget: The New York fiscal year (FY) 2026 budget alters personal income tax rates, modifies the Metropolitan Commuter Transportation District (MCTD) payroll tax, disallows certain deductions on covered properties owned by institutional real estate investors and introduces a state reporting requirement for federal partnership audit adjustments.
  • Administrative Law Judge Ruling on Document Management: Through New York’s new ruling, cloud-based document management offerings were classified as taxable prewritten software.

Vermont

  • House Bill 493: Vermont’s FY 2026 appropriations bill is in the process of being reconciled in a conference committee.
  • House Bill 1600: This bill pauses Vermont’s rolling conformity to the Internal Revenue Code (IRC).

Southeast

Alabama

  • House Bill 163: This House Bill has decoupled Alabama from federal amortization of research expenditures, allowing immediate taxable deductions.
  • House Bill 191: The Alabama House Bill has given authorization to local governments to opt out of newly enacted sales tax exemptions.

Florida

Georgia

  • House Bill 111: The Georgia House bill was passed, reducing corporate and personal income tax rates from 5.39% to 5.19% in 2025, with phased reductions to 4.99% tied to revenue thresholds.
  • County Sales Tax Bulletin (July 2025): The Georgia tax bulletin announced new county-level sales tax changes effective July 1, 2025.
  • Taxicab Regulation Ruling: The Georgia Court of Appeals ruling applied the state’s Taxicab Regulation to rideshare operators, requiring sales tax remittance for prior tax periods.

Mississippi

  • Freight Charges Tax Base Ruling: The Mississippi Supreme Court has ruled that third-party freight charges should not be included in the use tax base for tangible goods.

South Carolina

  • Duke Energy Corporation Credit Limit Clarification: The South Carolina Court of Appeals confirms that a $5 million investment credit cap is an annual limit, not a lifetime cap.
  • House Bill 3800: South Carolina expands the durable medical equipment sales and use tax exemption to all sellers, regardless of location.

Texas

  • Legislature Simplifies and Extends R&D Franchise Tax Credit: Texas extended the R&D franchise tax credit beyond its 2026 expiration and increased the credit rate to 8.722% of the calculated base amount.
  • Comptroller Decision No. 119,652: Printing as a service is now considered a taxable service in Texas, not eligible for the cost of goods sold (COGS) deduction or reduced franchise tax rate.
  • Private Prison Sales Tax Ruling: Texas private prison contractors are not considered government instrumentalities and are subject to sales tax on operational purchases.
  • Private Letter Ruling No. 20250318L: Texas services assisting plan sponsors with federal Prescription Drug Data Collection (RxDC) reporting obligations will now qualify as taxable data processing services.
  • Revised Data Processing Rule: Texas amended its data processing rule to clarify the treatment of bundled transactions and multistate use exemptions.
  • Senate Bill 1851: Texas municipalities that fail to complete and file required audits and financial statements on time may be barred from adopting tax rates above the no-new-revenue threshold.

Midwest

Illinois

  • PepsiCo Payroll Attribution Ruling: The Illinois Independent Tax Tribunal upheld that expatriate payroll is improperly attributed, disqualifying 80/20 treatment for a domestic subsidiary.
  • Chicago Lease Tax Application: The Illinois Department of Revenue clarified that leasing companies owe lease tax on Consumer Confidence Report (CCR) payments and use tax on moved-in vehicles.
  • General Information Letter ST 25-0022: The Illinois Department of Taxpayer Information Division clarified that itemized tariffs are part of the sale price and taxable if the seller is the importer of record.

Kansas

  • Senate Bill 269: A Kansas Senate Bill approved contingent personal and corporate tax rate reductions based on revenue and reserve thresholds.
  • House Bill 2231: The Kansas House Bill implements single sales factor apportionment and market-based sourcing beginning in tax year 2027.

West

Alaska

  • Senate Bill 113: Alaska has adopted a market-based sourcing methodology for sales of services and intangible property.

California

  • Senate Bill 1043: California has suspended net operating losses and caps business tax credits at $5 million annually through 2027, with carve-outs for small businesses and disaster-related losses.
  • Sales Tax on Cardiac Monitors: In California, cardiac monitors were determined not to be exempt as medicine under state sales and use tax law.

Oregon

  • Microsoft Ruling Revision: The Oregon Tax Court clarified its prior opinion on Microsoft’s apportionment methodology following a motion for reconsideration.
  • NBCUniversal Nexus Decision: It was determined that NBCUniversal had economic nexus in Oregon through affiliate stations, setting the precedent for other broadcasters in the state.

Utah

  • House Bill 106: Utah reduced corporate income and franchise tax rates and enacted additional updates to the state tax regime.

Washington

  • IST Solution Inc. Reimbursement Treatment: The Washington State Board of Tax Appeals ruled that reimbursements to a towing company for third-party payments qualify for B&O tax pass-through treatment.
  • Limelight Content Delivery Network (CDN) Services Ruling: It was ruled that CDN services are exempt from retail sales tax as web hosting; monetization services remain taxable.
  • New Administrative Rules for Unclaimed Property: The Washington Department of Revenue adopted enhanced enforcement rules for unclaimed property, including audit procedures, subpoena authority and use of third-party auditors.
  • Revenue-raising Legislation: Several bills were passed in Washington to address budget deficits by expanding the retail sales tax base and increasing business and occupation tax rates.
  • Budget Expands Tax Base and Rates: Washington’s 2025 – 2027 budget adds sales tax to seven new service categories and raises capital gains and estate tax rates, impacting service providers and high-net-worth individuals starting October 1, 2025.

Navigate SALT Complexities With Trusted Guidance

The second quarter of 2025 has been marked by significant changes in the state and local tax landscape, demanding attention from businesses and individuals alike. Stay ahead of the evolving SALT landscape by consulting with your tax advisor or a qualified Cherry Bekaert SALT professional today.

Connect With Us

Mark R. Arrigo headshot

Mark R. Arrigo

State & Local Tax Leader

Partner, Cherry Bekaert Advisory LLC

Lauren Stinson headshot

Lauren Stinson

Sales & Use Tax Leader

Partner, Cherry Bekaert Advisory LLC

Contributors

Connect With Us

Mark R. Arrigo headshot

Mark R. Arrigo

State & Local Tax Leader

Partner, Cherry Bekaert Advisory LLC

Lauren Stinson headshot

Lauren Stinson

Sales & Use Tax Leader

Partner, Cherry Bekaert Advisory LLC