Key Takeaways
- The Property Tax Cycle At A Glance
- Alaska and Montana Contemplate a Statewide Sales Tax
- California Considering an End to Water's Edge Elections
- Arizona and Ohio Unclear About Conformity
- Utah Proposes Digital Ad Tax
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.
Can you say this fast three times?
Apportionment: The Persistent Puzzle of Proper Sourcing
Apportionment is back in the spotlight—and once again proving it’s anything but simple. Recent updates show states and taxpayers sparring over what income belongs in the apportionment formula, where receipts should land, and whether tax structures fairly measure in‑state activity. Courts are weighing delivery versus destination, lawmakers are stretching definitions to pull more income into the mix, and constitutional arguments are getting their turn at the podium. All told, apportionment remains a carefully calculated balancing act that can trip up even the most seasoned multistate taxpayers.
CALIFORNIA
NTU Appeals Ruling in Apportionment Law Fight With California - Paul Jones, Tax Notes ($):
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At issue in the case is a fiscal 2025 budget provision that modified the state’s apportionment statute by adding language that says existing law excludes from the state’s apportionment formula any “transaction or activity, to the extent that it generates income or loss not included in ‘net income’” subject to apportionment, meaning income that is not included for any reason, "including exclusion, deduction, exemption, elimination, or nonrecognition.”
MICHIGAN
Michigan Court: Energy Company’s Electricity Sales Sourced to State - Cameron Browne, Tax Notes ($):
In its February 17 decision in CMS Energy Corp. v. Department of Treasury, the court of appeals denied an energy company’s claimed $7.8 million corporate income tax refund, finding that its sale of wholesale electricity was ultimately delivered in Michigan.
UTAH
Utah Lawmakers OK Corporate Income Definition Change - Michael Nunes, Law 360 ($):
The Senate passed H.B. 77 on Friday by a 27-1 vote after the House of Representatives passed the legislation by a 72-3 vote. The legislation would expand the state's definition of unrelated business income to include income allocated to the state, rather than just apportioned.
Sales Tax Issues: Tariff Tangles, Sourcing Snarls, and Taxability Traps
Sales tax continues to be anything but boring as states, courts, and lawmakers roll out new developments. Recent updates include unresolved questions around sales taxes collected on now‑invalid tariffs, changes to how remote sales are sourced, and renewed interest from longtime sales‑tax holdout states looking for steadier revenue. On top of that, states are revisiting what transactions are taxable—like downloaded software—while courts continue to shape the scope of sales tax exemptions. Together, these changes highlight just how quickly the sales tax landscape can shift.
Sales Tax Refunds on Tariffs Will Be Messy, ‘If Not Impossible’ - Michael J. Bologna, Bloomberg Tax ($):
Sales tax analysts and state tax administrators noted the justices punted on the tariff refund question when they determined, in a 6-3 decision, the International Emergency Economic Powers Act doesn’t grant the president the authority to levy tariffs—a power assigned to Congress. In avoiding the refund issue, the court was silent on any downstream impacts on state sales taxes paid on tariffed goods.
ARIZONA
Ariz. Sales Tax Sourcing Change OK'd By House Panel - Sanjay Talwani, Law 360 ($):
In a 5-3 vote along party lines, the House Ways and Means Committee passed H.B. 2290, sponsored by Rep. Justin Olson, R-Mesa, the panel's chair. Under the bill, an order would be considered received, for sales sourcing purposes, when all its necessary information were obtained by the seller at a physical business location, regardless of where the order were accepted or approved, or where computer servers used in the transaction were located.
ALASKA/MONTANA
Alaska and Montana Revisit Sales Taxes to Help Stabilize Revenue - Michael J. Bologna, Bloomberg Tax ($):
Mounting concern over long-term revenue stability is pushing two of the nation's five remaining sales tax holdout states - Alaska and Montana - to seriously consider adopting statewide levies for the first time.
The political and fiscal dynamics differ, but lawmakers and analysts in both states are searching for more durable tax strategies that will save them from the revenue peaks and valleys that plague budgeting. If either adopts a general sales tax, they would be the first state to do so since Vermont in 1969.
COLORADO
Colo. Bill Would End Software Sales Tax Exemption - Jaqueline McCool, Law 360 ($):
H.B. 1223, which was introduced Tuesday by Rep. Steven Woodrow, D-Denver, and House Speaker Andrew Boesenecker, D-Larimer, would consider software available "for repeated sale and license" tangible personal property subject to tax. The statewide sales tax rate is 2.9%.
TEXAS
Texas Court Sides With Manufacturer in Sales Tax Exemption Suit - Cameron Browne, Tax Notes ($):
In a February 12 decision in Hancock v. ChampionX LLC, the Texas Court of Appeals, Fifteenth District, upheld a sales and use tax refund after it determined that a chemicals manufacturer was entitled to an exemption on the purchases of containers and related services under the state’s tax law.
Other State News: Filing in Arizona, California Water's Edge Elections and Data Centers, Utah Digital Advertising Tax
MTC Panel Weighing Updates To Broadcasting Tax Rule - Paul Williams, Law 360 ($):
The draft rule, outlined during an online meeting of the MTC's Model Sourcing Regulations Work Group, would explicitly apply the broadcast regulation to internet activity. The rule also includes two alternative sections that states could follow based on whether they've adopted the MTC's market-based sourcing regulations that account for broadcast and streaming activity. Market-based sourcing generally sources receipts to a customer's location
ARIZONA
Arizona Tax Conformity Dispute Headed to Budget Talks After Veto - Daniel Moore, Bloomberg Tax ($):
Arizona officials are urging taxpayers to use the state’s tax forms to file their returns, even as the governor and lawmakers continue fighting over aligning the state’s tax code with those forms.
Republicans, who control the Legislature, are preparing to press for full conformity with President Donald Trump’s 2025 tax law in the state’s budget negotiations, a top lawmaker said Wednesday. Gov. Katie Hobbs (D) last week vetoed a Republican measure (HB 2785) to do just that, arguing the federal law’s business deductions should be part of budget talks.
CALIFORNIA
California Lawmakers Propose to End Water's-Edge Election - Paul Jones, Tax Notes ($):
A California bill would eliminate the state's water’s-edge election, establishing mandatory worldwide combined reporting.
A.B. 1790, introduced February 10, would terminate all water's-edge elections and disallow the election for tax years beginning on or after January 1, 2028.
California to Consider Taxing Data Centers for Energy Rate Hikes - Casey Murray, Bloomberg Tax ($)
Large data centers in California may soon be required to pay surcharges to cover the cost of increased energy demand they generate.
The surcharges, which would be considered tax increases for certain payers, would be instituted by a newly introduced bill (S.B. 1168) aimed at helping to offset the extra cost data centers may impose on surrounding communities.
States across the country have already begun efforts to rein in or discourage data centers from being built, as existing facilities demand significant water and electricity resources. The rapid development of data centers increased costs for consumers in the largest US energy market by more than $9.3 billion over the course of a year, the independent market monitor for PJM Interconnection estimated.
FLORIDA
Florida House OKs Bill to Bar New Local Business Taxes - Matthew Pertz, Tax Notes ($):
The House passed the committee substitute for H.B. 103 on an 82-26 vote February 17. This comes as legislators are also considering reducing or entirely outlawing local property taxes, putting city and county revenues under further pressure.
ILLINOIS
Illinois Budget Proposes Social Media Fee, Pauses Data Center Break - Emily Hollingsworth, Tax Notes ($):
Gov. JB Pritzker (D) introduced the $56 billion fiscal 2027 budget recommendation on February 18.
[...]
To generate approximately $200 million in estimated revenue for fiscal 2027, Pritzker’s budget plan proposes a “social media platform fee” on social media companies that “collect consumer data and sell to third-party buyers.” Revenue from the fee would be directed to the general funds to support K–12 education, according to the budget plan.
OHIO
Ohio House OKs Immediate Effect For Federal Conformity - Paul Williams, Law 360 ($):
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The legislation's supporters have said the emergency clause, which puts the bill into effect immediately after it becomes law, is imperative to have the bill take effect before Tax Day, April 15. Bills without an emergency clause typically take effect 90 days after enactment.
UTAH
Bill Creating a Tax on Targeted Advertising Advances Out of Committee - Abigail Jones, News 4 Utah:
S.B. 287 Targeted Advertising Tax imposes a tax on entities that deliver targeted advertising in Utah, defined as advertising that uses individualized data profiles to target an ad to a specific individual or audience.
Utah's effort to tax digital advertising would align it with Maryland and Washington, where similar taxes have prompted legal challenges. Utah's bill reflects an effort to account for those prior disputes, but it's unclear whether or not it will ultimately be successful
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
Real Estate & Business Personal Property — The Annual Cycle at a Glance - Sarah Weintraub, Eide Bailly
As property tax deadlines approach each year, it’s helpful to understand the lifecycle that drives assessments, appeals, and payments. Whether you own real estate, business personal property, or both, a little proactive planning can minimize surprises and create opportunities for savings.
Below is a quick, practical overview of the cycle—designed to help you anticipate what’s ahead and identify where a strategic review might benefit your business.
1. Lien Date: Where the Year Begins
The lien date establishes ownership and taxable value for the upcoming year. It’s a great moment to confirm asset accuracy and evaluate exemptions before assessments begin.
2. Business Personal Property Filings: Reporting What You Own
Annual renditions require businesses to list assets, acquisitions, and disposals. This step often reveals ghost assets, missed disposals, or exemption opportunities—quick wins that can reduce taxable value.
3. Assessor Review & Valuation: How the Value Is Set
Jurisdictions use market data or depreciation schedules to determine taxable value. A brief review of these assessments often uncovers errors or misclassifications that are worth correcting before they become final.
4. Appeal Period: Your Window to Challenge
If something looks off, the appeal window is your opportunity to act. Even small adjustments can lead to meaningful tax savings, especially in changing markets or multi location operations.
5. Tax Bill Issuance: Values Become Dollars Owed
Once values are finalized, tax bills arrive with due dates, discount options, and penalty risks. This stage is ideal for reviewing cash flow impacts and comparing year over year changes.
6. Payment: Closing Out the Cycle
Timely payment avoids unnecessary penalties and provides a natural checkpoint for improving your process—tightening asset tracking, planning for appeals earlier, or preparing for next year’s filings.
7. Budgeting & Planning: Turning Insight Into Strategy
Property taxes are often a top operating expense, making proactive planning essential. Aligning expected assessments, exemptions, and asset changes with your budgeting cycle helps you avoid year end surprises and opens the door to targeted savings opportunities.
Make a habit of sustained success.
