Key Takeaways
- Illinois Amnesty Program Kicks Off
- Navigating Sales Tax in Colorado
- Rhode Island Decouples From Section 174
- Other SALT Updates
Welcome to this edition of our roundup of state tax developments. The State Tax News and Views is published biweekly. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance and incentive needs.
Tax Administration: The Rules, the Reviews, the Relief
State Changes to Tax Compliance Burdens for Remote and Mobile Workers - Andrew Wilford, Tax Notes ($):
A common argument among policymakers during the pandemic was whether remote work would become the new normal for office jobs or a temporary fad. Both sides of that debate were wrong: While most jobs in which remote work is possible do not look like they did in 2020, neither have they returned to the pre-pandemic norm.
[. . .]
While convenient for avoiding commutes, working remotely can be less so when it comes to state income taxes.
[. . .]
In 22 of the 41 states with an income tax, a single day of work in that state - no matter how much income is earned - obliges the taxpayer to file a tax return. Life gets more complicated for employers as well: In 15 states, employers must withhold income taxes if an employee works a single day there.
[. . .]
While convenient for avoiding commutes, working remotely can be less so when it comes to state income taxes.
[. . .]
In 22 of the 41 states with an income tax, a single day of work in that state - no matter how much income is earned - obliges the taxpayer to file a tax return. Life gets more complicated for employers as well: In 15 states, employers must withhold income taxes if an employee works a single day there.
Illinois Tax Amnesty is Coming Soon - Melissa Menter, Eide Bailly:
The Illinois General Tax Amnesty program began October 1 and runs through November 17. This is a great opportunity for taxpayers with outstanding tax liabilities to settle their debts. During this period, taxpayers can pay and file prior unpaid or unfiled tax liabilities for periods ending after June 20, 2018, and before July 1, 2024. As long as liabilities are paid in full by the end of the amnesty program, all eligible penalties and interest will be waived.
California Business Deals Freeze When Tax Audits Enter Picture - David Klasing, Bloomberg Tax ($):
California is auditing with more data and more muscle. If you're selling or buying a business in the state, the California Department of Tax and Fee Administration can instruct escrow to hold funds while it checks for unpaid sales and use taxes.
The biggest deal-killer shows up at closing: If tax clearance isn't in hand, the buyer can personally be liable for up to the purchase price under successor-liability rules.
California’s sales-and-use tax audit program runs on a deliberate three-year cycle and targets the biggest, most productive accounts. Selection is increasingly data-driven.
Beyond routine cycles, auditors look for mismatches between what you report to CDTFA and the gross receipts on your federal tax return, unusual exempt-sales patterns, and industry risk. (Restaurants and other cash-intensive operations are perennial targets.)
The biggest deal-killer shows up at closing: If tax clearance isn't in hand, the buyer can personally be liable for up to the purchase price under successor-liability rules.
California’s sales-and-use tax audit program runs on a deliberate three-year cycle and targets the biggest, most productive accounts. Selection is increasingly data-driven.
Beyond routine cycles, auditors look for mismatches between what you report to CDTFA and the gross receipts on your federal tax return, unusual exempt-sales patterns, and industry risk. (Restaurants and other cash-intensive operations are perennial targets.)
If you are getting ready to sell or buy, our Eide Bailly Transaction Advisory team can help you maximize business opportunities and navigate seamless transactions.
NJ Tax Agency To Roll Out Pilot Mediation Program - Paul Williams, Law360 ($):
The New Jersey Division of Taxation will begin a two-year pilot mediation program Wednesday that will allow businesses to settle certain corporation business tax and sales and use tax disputes.
The program, which will run until Sept. 30, 2027, will be open for disputes with at least $5,000 in tax in controversy before penalties and interest. Division representatives have said the program could help reduce litigation and speed up the settlement process for certain disputes
The program, which will run until Sept. 30, 2027, will be open for disputes with at least $5,000 in tax in controversy before penalties and interest. Division representatives have said the program could help reduce litigation and speed up the settlement process for certain disputes
Sales and Use Tax: The Rules Behind the Receipts
Florida's Commercial Rent Sales Tax Repeal a Boon for Businesses - Daniel Kaskel, Bloomberg Tax ($):
For business leaders, landlords, tenants, and attorneys both in and outside of Florida, the state’s recent sales tax repeal for commercial rents will reduce costs significantly and align the state with the rest of the country, where no such tax exists.
The law broadens the scope of tax relief by eliminating Section 212.031 of the Florida Statutes, which had imposed a 2% state sales tax, plus applicable local discretionary sales surtaxes, on rental payments for commercial real property.
Effective Oct. 1, no state sales tax or discretionary sales surtax will apply to rent or license fees for commercial rental or occupancy periods beginning on or after that date. This includes payments for commercial office or retail space, warehouses, self-storage facilities, and even license fees for vending or amusement machines.
The law broadens the scope of tax relief by eliminating Section 212.031 of the Florida Statutes, which had imposed a 2% state sales tax, plus applicable local discretionary sales surtaxes, on rental payments for commercial real property.
Effective Oct. 1, no state sales tax or discretionary sales surtax will apply to rent or license fees for commercial rental or occupancy periods beginning on or after that date. This includes payments for commercial office or retail space, warehouses, self-storage facilities, and even license fees for vending or amusement machines.
Colo. Says Sales Tax Applies To Public Improvement Fees - Sanjay Talwani, Law360 ($):
Public improvement fees, imposed by private parties on customers in certain shopping complexes in Colorado, are subject to the state's sales tax, the state Department of Revenue said.
In a general information letter released Thursday, the Colorado Department of Revenue said the fees are not federal, state, local or special district taxes or retail delivery fees, so they are included in the price the customer pays that is subject to the sales tax.
In a general information letter released Thursday, the Colorado Department of Revenue said the fees are not federal, state, local or special district taxes or retail delivery fees, so they are included in the price the customer pays that is subject to the sales tax.
Airbnb Fights $10.5M Colorado Tax Bill On Guest Fees - Sanjay Talwani, Law360 ($):
The guest fee charged by Airbnb on rentals in Colorado is not subject to state and local sales taxes, the company told a state court, seeking to overturn a $10.5 million assessment by the state Department of Revenue.
In a complaint filed Friday against the department and its executive director, Heidi Humphreys, Airbnb Inc. said the fee it charges on rental guests above costs charged by the rental hosts was not subject to the state sales tax, county lodging taxes or local marketing taxes from 2018 to 2021. Those taxes are imposed on sales of tangible personal property and on specific services that do not include those provided by Airbnb, it argued.
In a complaint filed Friday against the department and its executive director, Heidi Humphreys, Airbnb Inc. said the fee it charges on rental guests above costs charged by the rental hosts was not subject to the state sales tax, county lodging taxes or local marketing taxes from 2018 to 2021. Those taxes are imposed on sales of tangible personal property and on specific services that do not include those provided by Airbnb, it argued.
Credits and Incentives
Colorado, Illinois Award Tax Incentives to AI and Auto Projects - Emily Hollingsworth, Tax Notes ($):
A global automobile parts company and a company that provides artificial intelligence resources for universities are among the latest companies to benefit from state incentives aimed at encouraging high-tech investments and job creation.
Illinois Gov. JB Pritzker (D) and the Illinois Department of Commerce and Economic Opportunity (DCEO) announced in a September 18 release that OPmobility Exterior USA LLC, a global supplier of auto parts, received nearly $3.7 million in tax credits through the DCEO's Reimagining Energy and Vehicles Illinois program to establish operations in the state, including the creation of 81 jobs.
Meanwhile, Colorado Gov. Jared Polis (D) announced in a September 19 release that the state’s Economic Development Commission approved roughly $323,000 in job growth incentive tax credits for BoodleBox, a company that hosts AI tools for colleges and universities.
Illinois Gov. JB Pritzker (D) and the Illinois Department of Commerce and Economic Opportunity (DCEO) announced in a September 18 release that OPmobility Exterior USA LLC, a global supplier of auto parts, received nearly $3.7 million in tax credits through the DCEO's Reimagining Energy and Vehicles Illinois program to establish operations in the state, including the creation of 81 jobs.
Meanwhile, Colorado Gov. Jared Polis (D) announced in a September 19 release that the state’s Economic Development Commission approved roughly $323,000 in job growth incentive tax credits for BoodleBox, a company that hosts AI tools for colleges and universities.
The Eide Bailly State & Local Tax team provides specialized credits and incentives services designed to help businesses maximize savings and growth potential. Identifying these opportunities early—before construction begins or hiring decisions are made—is key to unlocking their full value. It’s never too early to start the conversation; our team is here to guide you through the process and ensure you don’t miss out on valuable benefits.
Other SALT Updates: Legislative Changes and Court Decisions
California
California FTB, Taxpayer Groups File Briefs in Apportionment Suit - Paul Jones, Tax Notes ($):
California taxpayer groups and the state’s Franchise Tax Board have filed briefs in their fight over whether deducted income — including foreign dividends — is includable in California’s sales factor.
The briefs in the consolidated cases of California Taxpayers Association v. California Franchise Tax Board and National Taxpayers Union v. California Franchise Tax Board were filed in Sacramento County Superior Court on September 19, ahead of a scheduled hearing on September 30.
The case revolves around a 2024 bill (S.B. 167) that added section 25128.9 to the Cal. Rev. and Tax. Code, which says that any transaction or activity, to the extent it generates income or loss that’s not included in net income subject to apportionment for any reason — including “exclusion, deduction, exemption, elimination, or nonrecognition” — is excluded from the state’s apportionment formulas.
The briefs in the consolidated cases of California Taxpayers Association v. California Franchise Tax Board and National Taxpayers Union v. California Franchise Tax Board were filed in Sacramento County Superior Court on September 19, ahead of a scheduled hearing on September 30.
The case revolves around a 2024 bill (S.B. 167) that added section 25128.9 to the Cal. Rev. and Tax. Code, which says that any transaction or activity, to the extent it generates income or loss that’s not included in net income subject to apportionment for any reason — including “exclusion, deduction, exemption, elimination, or nonrecognition” — is excluded from the state’s apportionment formulas.
New Jersey
Week of Insights: NJ's Online Seller Tax Policy Is an Overreach - Andrew Leahey, Bloomberg Tax ($):
It seems that if New Jersey had its way, it would deem every website as effectively doing business in Trenton.
The state’s Division of Taxation finalized a rule in June that treats online interactions—such as responding to a customer email or soliciting sales through internet cookies that gather customer data—as enough to trigger state corporate income tax liability, regardless of physical presence.
The state’s Division of Taxation finalized a rule in June that treats online interactions—such as responding to a customer email or soliciting sales through internet cookies that gather customer data—as enough to trigger state corporate income tax liability, regardless of physical presence.
Rhode Island
Rhode Island Decouples From OBBBA Treatment of Section 174 Expenses - Matthew Pertz, Tax Notes ($):
Rhode Island has updated its tax guidance on research and experimental expenses, decoupling from the federal tax treatment of IRC section 174 deductions under the reconciliation bill.
[...]
Rhode Island will not allow taxpayers to accelerate these expenses, according to new guidance from the state Department of Revenue, and the state will decouple from federal guidance on the amortization of section 174 deductions for 2025. Taxpayers that accelerate their domestic research expenses and choose not to amortize at the federal level will have to amortize research expenditures on their Rhode Island return.
[...]
Rhode Island will not allow taxpayers to accelerate these expenses, according to new guidance from the state Department of Revenue, and the state will decouple from federal guidance on the amortization of section 174 deductions for 2025. Taxpayers that accelerate their domestic research expenses and choose not to amortize at the federal level will have to amortize research expenditures on their Rhode Island return.
Texas
Texas Codifies Nonprofit Property Tax Exemption - Kennedy Wahrmund, Tax Notes ($):
Texas has enacted legislation clarifying and formalizing a property tax exemption already available to certain nonprofits in the state’s largest county.
H.B. 23, signed by Gov. Greg Abbott (R) on September 17, amends the state tax code to codify an exemption for organizations that promote agriculture, support youth, and provide educational support in the community.
[...]
Beginning January 1, 2026, the law exempts property owned by nonprofits with “charitable, educational, and scientific purposes” if it is located in a county with over 3.3 million residents and is used for those activities.
H.B. 23, signed by Gov. Greg Abbott (R) on September 17, amends the state tax code to codify an exemption for organizations that promote agriculture, support youth, and provide educational support in the community.
[...]
Beginning January 1, 2026, the law exempts property owned by nonprofits with “charitable, educational, and scientific purposes” if it is located in a county with over 3.3 million residents and is used for those activities.
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
Business Personal Property Tax - Tom Marin, Eide Bailly:
As the end of 2025 approaches, it’s critical to stay ahead of your Business Personal Property Tax (“BPPT”) compliance and minimization efforts. Many states and the local jurisdictions thereof have March-April deadlines for BPPT returns. Early planning ensures accuracy and reduces rushed or even delinquent filings. BPPT can account for a significant portion of your local tax liability. Many companies overpay due to asset misclassification, missing entitled exemptions, or outdated records.
Who should pay close attention to BPPT compliance?
• Multi-location businesses
• Startups scaling rapidly with significant asset additions
• Businesses with $400K+ in tangible assets and/or inventory
• Manufactures, distributors, retailers, and data centers
Businesses should consider seeking consultation with qualified advisors for assistance in the following areas:
• Multi-jurisdiction compliance
• Valuation & Classification (ensure assets are properly classified to reduce overpayment risk)
• Asset Review (ensure assets eligible for exemption or disposed assets are appropriately rendered)
• Appeals & Audit Defense (representation and support in the event of audit or over-assessment)
Who should pay close attention to BPPT compliance?
• Multi-location businesses
• Startups scaling rapidly with significant asset additions
• Businesses with $400K+ in tangible assets and/or inventory
• Manufactures, distributors, retailers, and data centers
Businesses should consider seeking consultation with qualified advisors for assistance in the following areas:
• Multi-jurisdiction compliance
• Valuation & Classification (ensure assets are properly classified to reduce overpayment risk)
• Asset Review (ensure assets eligible for exemption or disposed assets are appropriately rendered)
• Appeals & Audit Defense (representation and support in the event of audit or over-assessment)
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