Key Takeaways
- Taxes on Groceries are Getting Stale
- Florida, Idaho, Oregon and Virginia Grapple with H.R. 1 Conformity
- Maryland Looks For Exceptions to Tech Sales Tax
- California Court Finds Three-Factor Apportionment is Appropriate for Some Taxpayers
- Connecticut Working to Address Affordability
Welcome to this edition of our roundup of state tax developments. The State Tax News and Views is published weekly. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance and incentive needs.
A SALT Grab Bag: Small Bites, Big Impact
This week’s SALT news comes as a grab bag—extra salty. From policy updates to practical developments, these pieces span a range of topics—but each delivers a bite‑sized reminder that state and local tax rarely lacks flavor. Together, these updates offer a focused snapshot of how the SALT landscape continues to evolve, often by refining - not reinventing - the recipe.
A Familiar Recipe: Conformity Continues to Make Headlines
FLORIDA
Florida Bill Would Decouple From Some OBBBA Provisions - Matthew Pertz, Tax Notes ($):
S.B. 7048 cleared the Senate Finance and Tax Committee on a 7-0 vote February 25. If passed, it would decouple Florida from two of the most expensive corporate tax changes in the OBBBA (P.L. 119-21) that many states have decoupled their own tax codes from.
IDAHO
Idaho Tax Agency Says OBBBA Adjustments Will Delay Refunds - Emily Hollingsworth, Tax Notes ($):
H. 559, signed by Gov. Brad Little (R) on February 10, aligns the state to IRC changes as of January 1, including those under the OBBBA (P.L. 119-21), with some exceptions.
OREGON
Oregon Bill to Decouple From Bonus Depreciation Heads to Governor - Paul Jones, Tax Notes ($):
[...]
The legislation would disallow bonus depreciation under section 168(k) of the IRC for property placed in service beginning in tax year 2026, instead allowing for depreciation over the life of the property. It similarly decouples from the federal exclusion for gain from sales or exchanges of QSBS, requiring an addback of that gain beginning this year.
VIRGINIA
Virginia Moves from Rolling to Fixed Conformity - Melissa Menter
In addition, Virginia has identified several provision of H.R. 1 (One Big Beautiful Bill Act) to which it will not conform including:
Virginia also modified the amount of business interest that is allowed as a deduction for Virginia tax purposes. Beginning in tax year 2025, the allowable Virginia deduction was reduced from 50 percent to 20 percent of the amount of business interest disallowed at the federal level under IRC Sec. 163(j).
Previously enacted exceptions to federal conformity remain in effect, including:
Related: The State Conformity Puzzle: Updates, Trends, and Legislative Outlook
Back on the Menu: Prior Issues, New Developments
DISTRICT OF COLUMBIA
D.C. Filing Season to Continue for Now Despite Block on Decoupling - Cady Stanton, Tax Notes ($):
President Trump signed S.J. Res. 102 into law February 18, blocking the D.C. Council from decoupling the city’s tax system from 13 provisions in the One Big Beautiful Bill Act (P.L. 119-21).
FLORIDA
Florida House OKs Bill to Bar New Local Business Taxes - Matthew Pertz, Tax Notes ($):
The Florida House of Representatives has advanced a bill that would outlaw most local business taxes.
The House passed the committee substitute for H.B. 103 on an 82-26 vote February 17. This comes as legislators are also considering reducing or entirely outlawing local property taxes, putting city and county revenues under further pressure.
MARYLAND
Maryland Seeks Tech Sales Tax Carveouts - Daniel Moore, Bloomberg Tax ($):
[. . .]
The move would be a significant win for businesses and accountants that say taxes on a company's inputs amount to pyramiding. That's when taxes accumulate at multiple points in the production chain and result in higher prices for customers or lower wages and fewer jobs for workers.
Small Bites of SALT News Worth Chewing On
CALIFORNIA
California Court Finds Smithfield Foods Is Entitled to Tax Refund - Caitlin Mullaney, Tax Notes ($):
A Smithfield Foods Inc. subsidiary is an agricultural business entitled to use California's three-factor apportionment formula for multistate income, according to a California superior court judge.
In a February 26 proposed statement of decision in Smithfield Packaged Meats Corp. v. California Franchise Tax Board, Judge Gary D. Roberts of the California Superior Court, County of Los Angeles, found that Smithfield Packaged Meats Corp. is eligible for a refund of state income tax for the 2014 tax year, rejecting the state's argument that the business needed to use the state's general business statutory apportionment formula.
John Gupta, leader of the Eide Bailly State and Local Tax practice, comments:
This is a sneakily important case with much broader implications than its application to agricultural companies (who should review the court’s broad reading of “agricultural company” and consider refund claims). Beyond that, this case represents a possible beginning to a trend of taxpayer challenges to the now prevalent single sales factor apportionment formula. While the US Supreme Court has validated the single sales factor as a constitutional method of apportionment, the California court in this case invoked the rarely used concept of “alternative apportionment” to allow the taxpayer to use 3 factor apportionment rather than the statutorily required single sales factor. The concept of alternative apportionment exists in nearly every state statute as a discretionary concept and may be invoked if the statutory formula “does not fairly represent the taxpayer’s business activities in the state.” The case is a strong representation of the idea that the single sales factor may be a great economic development tool for the states, but will not always fairly represent the taxpayer’s business activity as required by state and constitutional law. Taxpayer’s should monitor judicial developments in this area and also consider whether alternative apportionment petitions could make sense in California and other states.
Let’s Be Reasonable: Sourcing California’s Restricted Stock Unit Income - Jason J. Galek, Tax Notes ($):
California generally applies a grant-to-vest workday allocation formula for restricted stock units (RSUs) received by a California employee who later relocates to another state before all units have vested to determine the California-source portion of the resulting income. The grant-to-vest workday allocation formula is a pro rata method that determines the California-source portion of equity compensation income by dividing the number of California workdays between the grant date and the vesting date by the total workdays during that same period. The formula is familiar, administrable, and supported by precedential authority. Less frequently examined is whether the formula remains reasonable in every application, as California’s own regulations require.
Should Single-Sales-Factor Formulas Be Constitutional? - Reuven S. Avi-Yonah, Tax Notes ($)
On October 28, 2025, Florida sued California in the Supreme Court over its application of a single-sales-factor (SSF) formula to exclude large out-of-state asset sales. But Florida couched its critique in much broader terms, seemingly attacking the validity of the SSF altogether.
[...]
Florida then argues that “rather than abandoning the policies that motivated this mass exodus, California has devised an unconstitutional business income apportionment scheme that rewards corporations that keep their operations in California and penalizes those that move out.”
CONNECTICUT
Connecticut Dems Announce Affordability Tax Relief Package - Matthew Pertz, Tax Notes ($):
[...]
S.B. 1, the most tax-centric of the package, would eliminate sales tax on school supplies; prepared food purchased at grocery stores; clothing under $100; and certain home appliances including refrigerators, washing machines, and dryers. The bill would also provide a renters’ tax credit for taxpayers earning under $75,000 and a tax credit for family members caring for elderly relatives, and it would eliminate the income tax on Social Security benefits.
LOUISIANA
Louisiana DOR to Ease Paperwork for Passthrough Elections - Matthew Pertz, Tax Notes ($):
The DOR's proposed rule LAC 61:I.1001, published February 20 in the Louisiana Register, is intended to simplify the election process for new passthroughs to be taxed at the entity level. The department will hold a public hearing March 10; comments on the rule must be submitted by March 24.
NEBRASKA
New Pillen-championed law gets tough on China, may cost Nebraska companies - Henry J. Cordes, Flatwater Free Press:
[...]
But under a new law Gov. Jim Pillen pushed to passage last year, that stalwart Nebraska company might be labeled something else: a “foreign adversarial company” — a status that would make it ineligible for the state tax incentives it has earned for choosing to grow in the state.
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
Taxes on Groceries are Getting Stale - Chris Martin, Eide Bailly
Who likes paying sales tax on food and food ingredients at the grocery store? Living in Minnesota- where we are taxed on just about everything- grocery food is a notable exception. I am always surprised when I travel to other states and see taxes added to my grocery receipt.
Across the country, state lawmakers are taking a fresh look at sales taxes on groceries, with several states moving to eliminate or reduce them altogether. Illinois and Arkansas repealed their state‑level grocery taxes beginning in 2026, while states such as Mississippi, Alabama, Tennessee, and South Dakota continue to debate similar proposals. Alabama reduced its rate on grocery food effective in September 2025. Kansas did the same as of Jan. 1, 2025. Only nine states impose a tax on grocery food and food ingredients, often at reduced rates. Even without a neighboring state for consumers to sneak across to buy tax-free groceries, a bill in Hawaii was introduced in January that would exempt sale of groceries from the state's 4% gross receipts tax.
The renewed attention reflects a broader concern about affordability: groceries are an unavoidable household expense, and sales taxes on food tend to fall more heavily on lower‑ and middle‑income families than on higher earners, meaning they are among the most regressive taxes. (Because purchases made with SNAP and WIC benefits are already exempt in most states, cutting grocery taxes allows those just above the poverty line now to benefit.) Supporters argue that cutting these taxes offers visible, immediate relief at a time when many households are still adjusting to higher prices due to inflation and tariffs. If the price of oil continues to increase, any transportation costs related to delivering groceries could increase as well.
Because everyone must buy food, the taxes consume a larger share of income for households with fewer resources. That reality helps explain why grocery tax cuts have attracted bipartisan support in several states. However, the next question faced by policymakers is how to replace the lost revenue or where to cut spending.
As fewer states continue to tax groceries and neighboring states repeal their taxes, political pressure is likely to grow. This pattern is familiar in state tax policy, where competitive pressures can drive a race to the bottom and practical politics often outweigh broader policy considerations.
