State Tax News & Views: Car Dealers Are Big Winners in CA Tax Sharing; NM Issues Publication for Tax Credits; More Than 58,000 Businesses Get TN Franchise Refunds

Welcome to this edition of our roundup of state tax developments. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance, and incentive needs. Beginning this week, the State Tax News and Views will move to a biweekly schedule.

Tangible Personal Property De Minimus Exemptions by State, 2025 - Joseph Johns, Tax Foundation:

In most states, businesses not only pay taxes on their real property (land and structures), but also on their machinery, equipment, fixtures, and supplies, which are classified as tangible personal property (TPP). For many small businesses, the amount owed is negligible, but the compliance costs can be considerable. By allowing a de minimis exemption for businesses with only modest amounts of property, states can eliminate these compliance costs for a trivial loss of revenue.

Fourteen states broadly exempt tangible personal property from taxation, while another 12 impose taxes on TPP but offer de minimis exemptions to avoid unduly burdening businesses with only a small amount of potentially taxable property.

Car Dealers Outpace Retail Giants With California Tax Deals - Laura Mahoney, Bloomberg Tax ($):

Online retail giants like Apple and Walmart gain the most from tax-sharing deals with California cities, but a closer look at the data shows that car dealers and other local businesses end up with the bulk of the contracts.

...

Out of 171 contracts that cities reported, 144 went to car dealers, fleet fuel companies, industry suppliers, construction materials companies, a few brick and mortar shopping malls, hotels and restaurants, and other entities. The total value of the deals to this group is $669 million, compared to $303 million for 27 contracts with e-commerce retailers.

Artificial Intelligence and the Future of Tax: Insights From Survey Results - Ryan Garbowski; Nicholas C. Hunt; Sonja E. Pippin; & Jeffrey A. Wong, Tax Notes ($):

As artificial intelligence is set to reshape how different industries do business, many tax professionals might be wondering how technological innovation will influence their daily lives and careers. AI offers exciting potential for increased efficiency, enhanced client services, and support for complex decision-making — yet it also raises important questions.[...]

State-By-State Roundup

Minnesota

Minn. Scales Down, Extends Tax Break For Data Centers - Sanjay Talwani, Law360 ($):

[Minn. Gov. Tim] Walz signed into law Saturday a compromise tax package in special session measures H.F. 9 and H.F. 16. Under H.F. 9, a tax omnibus, Minnesota is removing electricity purchases from qualification for a sales and use tax exemption offered to data centers and making other tax policy changes.

. . .

H.F. 16 extends the remaining data center tax break, applicable to hardware and software purchases, and makes other changes to the program.

New Jersey

NJ Adopts Rules Following MTC Stance on Internet Activities - Paul Williams, Law360 ($):

New Jersey will follow portions of the Multistate Tax Commission's guidelines on when a company's internet activities exceed a federal law's protection against state income taxes, according to final regulations the state's tax agency released Monday.

The rules...consider certain internet activities, such as providing post-sale assistance through email or placing cookies on a customer's computer that gather market research for sale to third parties, to exceed the tax protections of the Interstate Income Act of 1959.

New Mexico

New Mexico Court Reverses GRT Assessment Against Out-of-State Medical Staffing Firm - Colette Sutton, Eide Bailly LLP:

The New Mexico Court of Appeals reversed the decision of an administrative hearing officer (AHO) who upheld a $2.89 million gross receipts tax (GRT) assessment (including interest and penalties) against Vista Staffing Solutions, Inc., a Utah-based medical staffing company. The Taxation and Revenue Department had argued Vista was subject to GRT because it earned income from placing medical professionals in New Mexico healthcare facilities. Vista argued it was entitled to the out-of-state services exemption under NMSA 1978, § 7-9-13.1.

The Court concluded that:

Vista’s Services Were Performed Outside New Mexico: Vista’s core business activities—recruiting, credentialing, onboarding, and billing—were performed electronically from outside New Mexico. While Vista staff occasionally visited New Mexico, these visits were not central to the services contracted for.

Medical Services Not Attributable to Vista: Although Vista’s revenue depended on the placement of medical professionals in New Mexico, those professionals were independent contractors, not Vista employees. The Court held that their services could not be imputed to Vista.

Overview of New Mexico Business-Related Tax Credits - Colette Sutton, Eide Bailly LLP:

New Mexico has released a publication outlining various business-related tax credits available to individuals and entities that meet specific statutory requirements. These credits can be applied to several state tax programs, including the gross receipts tax (GRT), compensating tax (CMP), wage withholding tax (WWT), non-wage withholding tax (NWT), corporate income tax (CIT), and personal income tax (PIT). The publication emphasizes that some credits have limited eligibility dates, and claims must be filed within the designated timeframes to be considered. Credits can only be applied to the tax liabilities specified by law. For detailed information on each credit, taxpayers should refer to the relevant forms and statutes provided by the Taxation and Revenue Department. The summary reflects the current status as of the revision date, though future legal changes or rulings may impact the availability or application of these credits.

New York

NY Says Biz's Marketplace Facilitator Collects Tax on Sales - Michael Nunes, Law360 ($):

"An out-of-state business that stores goods in New York doesn't need to register for sales tax if the marketplace facilitator it uses already collects the tax and it doesn't make other sales in the state..."

Ohio

Ohio High Court Denies Aramark's CAT Refund Challenge - Cameron Browne, Tax Notes ($):

Aramark Corp. is not an agent under its management fee contracts and is therefore not entitled to a commercial activity tax (CAT) exclusion, the Ohio Supreme Court has held.

In its June 18 decision in Aramark Corp. v. Harris, the state high court denied the food services company a refund of CAT taxes it paid related to its management fee contracts, upholding a 2023 Board of Tax Appeals (BTA) decision.

Tennessee

More Than 58,000 Businesses Snag Tennessee Franchise Tax Refunds - Michael J. Bologna, Bloomberg Tax ($):

A list of more than 58,000 businesses claiming $1.27 billion in payments under Tennessee’s one-time franchise tax refund program is available to the public, but only for a few more days.

The Tennessee Department of Revenue will continue to post an online rundown of its Franchise Tax Schedule G Refunds through June 30. The state last year created a six-month window for businesses to amend their returns and file refund claims for franchise taxes paid in the last five years. Providing the refunds and publishing the names of refund claimants were required by the state to mitigate unexpected legal risks over the constitutionality of the tax.

It's always nice to see our clients benefit from programs like this one. Under Tennessee's franchise tax refund program Eide Bailly was able to help clients obtain over $2.2 million in refunds.

Texas

Texas Expands Manufacturing Exemption to Include Excavation and Blasting Starting October 2025 - Jennifer Barajas, Eide Bailly LLP:

Starting October 1, 2025, the Texas Comptroller will begin applying the Westmoreland interpretation of the sales tax manufacturing exemption. This means certain activities like excavation and blasting will now qualify as “processing,” making related equipment potentially exempt from sales and use tax. The change stems from a court ruling that broadened the definition of processing to include these steps when they directly affect a product intended for sale. Industries likely to benefit include mining, construction materials, oil and gas, and aggregate production.

Texas Comptroller Rules RxDC Reporting Services Are Taxable Data Processing Services - Colette Sutton, Eide Bailly LLP:

The Texas Comptroller issued a private letter ruling determining that a taxpayer’s services related to prescription drug data collection (RxDC) reporting are subject to Texas sales and use tax as taxable data processing services.

The taxpayer assists employer-sponsored health plans in meeting federal RxDC reporting requirements under the Consolidated Appropriations Act of 2021, offering three tiers of service:

Level 1 – Reporting Entity Only: Submits employer-prepared data files to the federal portal, tests files, and converts formats if necessary.
Level 2 – Guided Service: Helps employers gather and format limited data (mainly premium and life-years).
Level 3 – White Glove Service: Reviews employer documents, extrapolates data, and prepares complete RxDC reports.

The Comptroller found that all three levels involve data entry, storage, manipulation, or compilation—activities that fall within the definition of taxable data processing under Texas Tax Code §§ 151.0035 and 151.0101 and Rule 3.330. As such, the taxpayer is required to collect and remit sales tax on 80% of the fees charged for these services, in accordance with the partial exemption allowed under § 151.351.

Texas Extends Franchise Tax Break For R&D Costs Past 2026 - Zak Kostro, Bloomberg Tax ($):

Texas extended a franchise tax credit for qualifying research and development activities beyond 2026 under a bill signed by Gov. Greg Abbott.

S.B. 2206, which the Republican governor signed Sunday, provides a franchise tax credit for eligible R&D expenses, effective Jan. 1, 2026, according to an analysis [by the Ways & Means Committee]. The bill also will repeal provisions of the preexisting law relating to a franchise tax credit for certain R&D activities that were set to expire Dec. 31, 2026, according to the analysis.

Virginia

Virginia Tax Commissioner Finds Exemption Certificates Fail to Support Exempt Sales - Bloomberg Tax ($):

The Virginia Tax Commissioner determined in a letter ruling that the taxpayer's exceptions to a sales tax audit would not be removed...

The Commissioner determined that the taxpayer had received an exemption certificate from a customer that did not indicate the correct exemption and was, therefore, invalid.

Washington

Washington State Launches Tax Amnesty for Investment Income - Laura Mahoney, Bloomberg Tax ($):

Washington state businesses with unreported investment income can avoid penalties and interest if they participate in a temporary amnesty program through the Department of Revenue.

The voluntary disclosure program is available from July 1, 2025 through April 30, 2026, and again from July 1, 2026 through April 30, 2027 to encourage registered or unregistered businesses with unreported investment income subject to the business and occupations tax to come forward and pay tax owed. Relief also applies to income reportable on combined excise tax returns.

apple bite

Tax Bites: Tips, Tricks and Opportunities in SALT

Chris Martin, Director, Eide Bailly:

Whether it’s Supertramp singing about “Tak[ing] the Long Way Home” or Fleetwood Mac encouraging us to “Go Your Own Way”, it seems like everyone is on the move from one place to another. Especially business owners and retirees, who are more mobile than ever.

However, changing your domicile for state income tax purposes involves more than simply buying a home and moving to a different state. It requires establishing a new primary and permanent home, with the intention of remaining there indefinitely. It is more than just a matter of physical presence or days spent in each state. To successfully change your domicile, you must sever ties with your former state and build substantial connections in your new one. States often look at a variety of factors and keeping contemporaneous documentation is critical as courts and departments of revenue examine intent through objective evidence.

Because states do not want to lose tax revenue, they often audit individuals years down the road to verify a change of domicile and residency. Before you start the move, consulting with a tax professional about how best to plan and document such a change is important.