State and local tax (SALT) developments remained active throughout the second quarter of 2026. States continued to respond to federal tax changes, while courts and legislatures addressed income and franchise tax, software and digital services, sales tax, and other evolving compliance considerations.
This update highlights notable SALT developments from the second quarter, with a focus on items most relevant for compliance considerations and planning efforts.
Northeast
Connecticut
- Federal Tax Conformity Changes Enacted: Connecticut decoupled from certain federal provisions affecting research expenditures and qualified production property.
Maine
- Federal Tax Conformity and Bonus Depreciation Rules Revised: Maine updated its federal conformity rules while decoupling from certain provisions affecting research expenditures, bonus depreciation and qualified opportunity zones.
- Data Center Incentives Limited: Maine excluded certain new data centers beginning operations on or after August 1, 2026, from specified tax incentives.
Massachusetts
- Federal Tax Conformity and Pass-through Entity Tax Rules Updated: Massachusetts modified its treatment of business interest expense, depreciation and research expenditures, and expanded its pass-through entity tax framework.
New York
- Internet Activities Rule Upheld: A New York appellate court upheld the state’s rule addressing when internet-based activities may exceed P.L. 86-272 protections.
- Federal Tax Decoupling and Business Tax Changes Enacted: New York modified its treatment of research expenses and depreciation, extended certain corporate tax rates, and established a future sales tax reregistration program.
Rhode Island
- High-earner Tax and Federal Conformity Changes Enacted: Rhode Island enacted a phased tax increase on taxable income exceeding $1 million and modified its treatment of research expenditures and other federal tax provisions.
Southeast
Alabama
- Payment Processing Fees Excluded From Sales Tax Base: Effective September 1, 2026, fees charged to recover credit or debit card processing costs are excluded from the sales and use tax base.
Arkansas
- Individual and Corporate Income Tax Rates Reduced: Arkansas reduced individual income tax rates beginning in 2026 and the top corporate income tax rate beginning in 2027.
Florida
- Federal Tax Conformity Updated: Florida updated its federal conformity date while decoupling from certain provisions affecting bonus depreciation and research expenditures.
Kentucky
- Tax and Federal Conformity Changes Enacted: Kentucky updated its federal conformity rules, eliminated the 200-transaction economic nexus threshold and expanded taxable services to include data brokering.
Tennessee
- Software and Cloud Services Receive Different Business Tax Treatment: A Tennessee appellate court held that software licensing receipts were not subject to business tax, while certain cloud hosting and electronically delivered services were taxable.
Virginia
- Fantasy Sports Tax Enacted: Virginia enacted a new tax on fantasy contest revenue, along with an administrative fee, effective January 1, 2029.
Central
Colorado
- Software Sales Tax Rules Expanded: Effective January 1, 2027, Colorado will generally tax software delivered by tangible media, download or remote access, with exceptions for certain licenses and custom software.
Illinois
- Remote Retailer Tax Amnesty Announced: Illinois will offer an amnesty program from August 1 through October 31, 2026, providing qualifying remote retailers relief from penalties and interest.
Indiana
- Data Center Compliance Payment Enacted: Indiana established a new compliance payment for certain qualified data center users based on state sales and use tax not paid on electricity purchases.
- Tax Amnesty Program Announced: Indiana will offer a tax amnesty program from July 15 through September 9, 2026, providing qualifying taxpayers relief from penalties, interest and collection fees.
Minnesota
- Federal Tax Conformity and Pass-through Entity Tax Rules Updated: Minnesota updated its federal conformity rules, modified the treatment of certain income and research expenditures and extended its elective pass-through entity tax through 2027.
Ohio
- Automated Bank Account Processing Services Taxable: Ohio held that certain automated account and transaction processing services constitute taxable data processing and electronic information services.
West
Arizona
- Federal Tax Conformity Updated: Arizona updated its federal conformity rules while decoupling from bonus depreciation for qualified production property.
California
- Remotely Accessed Software Becomes Taxable: California enacted legislation extending sales and use tax to certain digital products, including many remotely accessed software offerings, effective January 1, 2027.
Washington
- High-income Tax Referendum Challenge Rejected: The Washington Supreme Court held that the state’s recently enacted high-income tax is not subject to the referendum process, while separate constitutional challenges remain pending.
Your Guide Forward
The second quarter of 2026 introduced significant SALT developments affecting federal tax conformity, income and franchise tax, software and digital services, sales tax, and compliance requirements across jurisdictions. Staying informed on these changes is critical for effective planning and risk management.
For tailored guidance and support in navigating these developments, consult your tax advisor or a qualified Cherry Bekaert SALT professional today.
Explore past Quarterly SALT Updates for additional developments and insights.
