State and local tax (SALT) developments remained active throughout the third quarter of 2025. From legislative responses to federal tax changes to expanded sales tax bases, sourcing rule clarifications, and new compliance programs, jurisdictions across the country continued to reshape their fiscal frameworks.
This update captures the most notable SALT developments from the third quarter, offering practical insights to help navigate compliance requirements, inform planning decisions, and stay aligned with shifting state and local tax policies.
Northeast
Maine
- Sales Tax Expansion & IRC Conformity: Maine will tax digital audiovisual and audio services starting January 1, 2026, and has updated IRC conformity to December 31, 2024.
New Jersey
- Real Estate Transfer Tax (RETT) Changes: New Jersey shifted the responsibility for additional RETT and Controlling Interest Transfer Tax fees from buyers to sellers and introduced a graduated rate structure for transfers over $1 million.
New York
- Unclaimed Property Self-audit Initiative: New York launched a self-audit program for businesses that may hold unclaimed property.
Rhode Island
- Budget Bill Addresses P.L. 119-21 Impacts: Rhode Island’s FY 2026 budget requires taxpayers to add back income excluded under the federal P.L. 119-21.
Southeast
Louisiana
- Sales Tax and Sub S Changes: Louisiana expanded exemptions for healthcare digital services and repealed corporate tax on S corporations starting in 2026.
Maryland
- Digital Services Tax Expansion in Maryland: Maryland expanded its sales and use tax to include a broad range of digital products and services under HB0352.
Midwest
Illinois
- Employer Food Subsidies Not Subject to Retailers’ Occupation Tax: Illinois ruled that employer-paid subsidies to cafeteria operators are not taxable gross receipts.
- Tax Amnesty Begins October 1: Illinois will offer tax amnesty from October 1 to November 17, 2025, for unreported taxes from periods ending after June 30, 2018, and before July 1, 2024.
Indiana
- Chatbot Services Not Taxable: Indiana ruled that AI chatbot services accessed via web or Application Programming Interface are nontaxable services.
Iowa
- Illicit Property Reporting Guidance Issued: Iowa now requires holders to report suspected fraudulent unclaimed property in a separate annual report after the dormancy period.
Michigan
- Property Tax Reassessment Trigger Clarified: The Michigan Supreme Court ruled that multiple conveyances of property interests must be aggregated to determine if a reassessment event is triggered.
Missouri
- Capital Gains Deduction and Agency Review Changes: Missouri enacted a 100% capital gains deduction for individuals starting in 2025.
West
California
- IRC Conformity Bill Approved: California updated IRC conformity to January 1, 2025, with selective decoupling from key provisions.
- Repair Parts Used in Out-of-State Equipment Are Taxable: A California court ruled that repair parts used in medical equipment serviced in-state and shipped out-of-state are subject to use tax.
- New Battery-embedded Product Fee Begins: California will impose a 1.5% fee on retail sales of covered battery-embedded products starting January 1, 2026.
- Amendments to Sourcing Regulation: California’s Franchise Tax Board finalized amendments to Regulation Section 25136-2, clarifying market-based sourcing rules for services and intangible property.
Colorado
- Streaming Services Taxable: A state appeals court ruled that Netflix subscriptions are tangible personal property subject to sales tax.
- Qualified Business Income Deduction Add-back Made Permanent: Colorado extended the requirement for certain taxpayers to add back the federal qualified business income deduction under IRC §199A when calculating state taxable income, removing the prior 2026 sunset date.
Oregon
- Intangible Property Tax Upheld: The Oregon Supreme Court upheld the inclusion of intangible property in central assessment.
Pennsylvania
- Realty Transfer Tax Rate Increase: Philadelphia raised its realty transfer tax rate to 4.578% effective July 1, 2025.
Washington
- Sales Tax Expansion Begins October 1: Washington will begin taxing services such as IT training, staffing and advertising.
- VDA Program Eligibility Expanded: Washington expanded eligibility for its Voluntary Disclosure Agreement program.
- Illicit Property Reporting Guidance Issued: Washington now requires separate reporting for suspected fraudulent unclaimed property.
Navigate SALT Complexities With Trusted Guidance
The third quarter of 2025 brought a wave of legislative and judicial activity across the SALT landscape, with states responding to federal tax changes, refining sourcing methodologies and introducing new compliance obligations. As we look ahead to Q4 and the start of 2026, staying informed is more critical than ever. For tailored guidance and support navigating these developments, consult your tax advisor or a qualified Cherry Bekaert SALT professional today.
