Key Takeaways
- No receipts, no refund in Ohio
- California's expanding nexus reach
- Washington waives penalties on digital ad tax
- More states address conformity with OBBBA
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.
This week’s SALT developments are a reminder that tiny facts can have outsized tax results. One employee, one warehouse, one “bundle,” or one digital-service label can be the difference between no footprint and a filing obligation—especially as states refine enforcement and definitions.
Nexus, Presence, and the Cost of a Small Footprint
Recent decisions continue to reinforce a familiar—but often underestimated—reality in SALT: it doesn’t take much to create nexus. A single employee, inventory stored with a third party, or limited
in‑state activity can be enough to trigger filing obligations and tax exposure. This week’s developments highlight how states, particularly California, are drawing firm lines around what constitutes “doing business” and enforcing those standards with little tolerance for minimal footprints.
CALIFORNIA
Nevada Company With One California Employee Owes California Tax - Christopher Jardine, Tax Notes ($):
In Matter of MGG Enterprise Inc., the OTA upheld the Franchise Tax Board’s assessment, including penalties and interest, against MGG Enterprise Inc., finding that the company's employment of a California resident qualified as doing business in the state. The decision, dated December 23, 2025, was released March 2.
California OTA Upholds Income Tax Liability for Amazon Seller - Caitlin Mullaney, Tax Notes ($):
In its decision in Matter of the Appeal of Fishbone Apparel Inc., the California Office of Tax Appeals (OTA) held that having inventory stored in Amazon fulfillment centers in California qualified Fishbone Apparel Inc. as a retailer engaged in business in the state. As such, the apparel company was required to file a state income tax return and pay the minimum tax of $800. The December 29, 2025, decision was released March 3.
Florida S Corporation Found to be Doing Business in California - Melissa Menter, Eide Bailly:
Taxability Lines Get Blurry: Services, Digital Transactions, and Mixed Bundles
As economies become more service‑ and technology‑driven, states are still struggling to keep their tax frameworks aligned with modern transactions. Questions around whether something is a taxable product, a nontaxable service, or a combination of both continue to generate confusion—and controversy. The articles in this section show how inconsistent classifications, evolving digital tax regimes, and sourcing rules can complicate compliance even for well‑intentioned taxpayers.
NEW YORK
A 'Mixed Bundle'? New York Struggles to Distinguish Between TPP and Services - Michael Penza, Tax Notes ($):
[...]
Over the last several years, the tribunal has differentiated between taxable sales of TPP and nontaxable sales of services without a coherent analytical framework — resulting in confusing opinions and dubious taxability determinations. This development is unfortunate, because throughout the last century, New York courts and the tribunal established a workable framework to distinguish between taxable TPP and nontaxable services, which was consistently applied and produced reasonable results.
WASHINGTON
Washington Court: Insurance Company’s Services Sourced to State - Cameron Browne, Tax Notes ($):
In a March 3 decision in Chicago Title Insurance Co. v. Department of Revenue, the court of appeals reversed a trial court's ruling granting business and occupation (B&O) and use tax refunds to the company, determining that the company’s services involving Washington real property are sourced to the state because the customers made first use of those services in Washington.
Washington State Waives Penalties Under Digital Advertising Tax - Michael J. Bologna, Bloomberg Tax ($):
[...]
Despite broad outreach efforts before the new sales tax collection duties launched Oct. 1, 2025, the department has discovered significant compliance gaps. The problem was particularly acute for businesses familiar with the state’s business & occupation tax, but didn’t have previous responsibilities under the sales tax, said Bryan Kelly, the department’s regional audit manager.
Wash. Dept. Finds Co.'s Digital Services Subject To Sales Tax - Maria Koklanaris, Law 360 ($):
In a determination released Friday, the state Department of Revenue said services provided in connection with these digital services, including implementation, customization and related project work, are considered "provided exclusively in connection" with the digital services and are also taxable retail sales.
Small Budget Pressure and Policy Responses
Behind many of these tax developments is a common driver: revenue pressure. From local governments facing structural budget gaps to states revisiting conformity and SALT cap workarounds, fiscal realities are shaping both enforcement posture and legislative action. This group of updates illustrates how budget needs influence tax policy decisions—and how taxpayers often find themselves navigating changes mid‑stream.
Made in City Hall: LA Faces Tough Budget and Tax Choices - Billy Hamilton, Tax Notes ($):
CALIFORNIA
Airbnb and San Francisco Agree to Settle $120 Million Tax Claim - Casey Murray, Bloomberg Tax ($):
The lawsuit, brought by Airbnb in February 2024, sought repayment on taxes the city assessed on the company’s gross income from 2019 to 2022. The company challenged its tax status in the city as a travel arrangement organization, arguing it belonged in a lower-taxed category.
FLORIDA
Florida Bill Would Decouple From Some OBBBA Provisions - Matthew Pertz, Tax Notes ($):
S.B. 7048 cleared the Senate Finance and Tax Committee on a 7-0 vote February 25. If passed, it would decouple Florida from two of the most expensive corporate tax changes in the OBBBA (P.L. 119-21) that many states have decoupled their own tax codes from.
MINNESOTA
Last week, Eide Bailly's own Chris Martin testified in support of the continuance of PTET. He states, "While most tax bills get laid over to be included in one omnibus tax bill at the end of session, the PTET bill seems to have gained interest and urgency, as it should. The Senate could vote on it as soon as this week. Minnesota businesses are watching carefully and hoping it passes. It's a "win-win" for the state and taxpayers."
Minn. Plan to Extend SALT Cap Workaround Stalls In House - Sanjay Talwani, Law 360 ($):
[...]
If enacted, the measure would extend Minnesota's option for pass-through entities to pay and file state tax returns at the entity level and receive a corresponding state tax credit, allowing individual members and shareholders to work around the federal SALT deduction cap.
OHIO
Ohio Updates Conformity To Federal Tax Breaks - Paul Williams, Law 360 ($):
Republican Gov. Mike DeWine signed S.B. 9 on Thursday, one day after the state Senate gave the bill final passage with a 31-0 vote. The bill, which took immediate effect upon enactment, generally conforms to the provisions in last year's federal budget reconciliation bill, such as immediate expensing for domestic research and experimentation costs and changes to limits on deductions for business interest.
OREGON
Oregon Legislature Votes to Extend State's SALT Cap Workaround - Casey Murray, Bloomberg Tax ($):
The bill (S.B. 1510) addresses a range of tax issues. Notably, it would extend for two years, through 2027, the Pass-Through Entity Elective tax that was originally created by the Oregon legislature in 2021 in response to the 2017 federal tax law that instituted a $10,000 SALT cap. The workaround allows certain businesses to pay taxes to the state under a different classification that is deductible on federal returns, while taxes paid otherwise wouldn’t be.
Oregon Bill to Decouple From Bonus Depreciation Heads to Governor - Paul Jones, Tax Notes ($):
S.B. 1507 was approved partly in response to the provisions of the One Big Beautiful Bill Act (P.L. 119-21), which reestablished 100 percent bonus depreciation and expanded the QSBS exclusion. The bill passed the House February 25 with a 34-21 vote after being approved in the Senate February 16 on a 17-13 vote. It now goes to Gov. Tina Kotek (D).
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
No Receipts, No Refund - Andrew Michuda, Eide Bailly
In a recent Ohio Supreme Court decision, a taxpayer was denied a refund because they failed to produce sufficient evidence to prove their sales ultimately ended up outside of Ohio. Jones Apparel sold merchandise to DSW, a national shoe retailer, which stored it in Ohio before shipping it to stores around the country. Jones was aware that the merchandise would be stored in an Ohio warehouse, yet they lacked information regarding the duration of storage or the specific DSW stores where the goods would ultimately be distributed.
Ohio Commercial Activity Tax (“CAT”) law requires that gross receipts from the sale of tangible personal property are sourced to where the property is received by the purchaser. If delivered by motor carrier or other means of transportation, this means the place where the property is “ultimately received after all transportation has been completed.”
Jones Apparel requested a refund of CAT paid, claiming that the merchandise it sold to DSW was ultimately delivered to DSW stores outside of Ohio. While the court conceded that the law does not require that documentation be contemporaneous with the time of transportation, it was not satisfied with the evidence provided. Specifically, testifying that “at least 80 percent” of goods ended up outside of Ohio falls well short of the evidence required.
Similarly situated taxpayers should maintain detailed records regarding the ultimate destination of goods sold if they are temporarily being stored in Ohio. If Ohio CAT has been paid on sales that they can prove were delivered outside the state, refunds may be available. If the information is available when computing Ohio CAT liabilities, sales ultimately delivered outside the state can potentially be excluded from the tax base.
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