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The SALT Brief

State Tax Changes Taking Effect January 1, 2025, Frazier & Deeter

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State and local tax laws are constantly evolving, creating challenges for businesses trying to stay compliant. The SALT Brief is a regularly updated resource that highlights key legislative changes, regulatory updates and policy shifts across the US.

Table of Contents

March 2025 Edition

Georgia

The Georgia Department of Revenue has adopted, effective February 6, 2024, amendments to Ga. Code § 560-7-3-.13 (Consolidated Returns). The regulation conforms to law changes effective for taxable years beginning on or after January 1, 2023, that allow a Georgia affiliated group that files a consolidated income tax return for federal income tax purposes to file a consolidated return for Georgia income tax purposes, without need of prior approval. Members of an affiliated group that are subject to Georgia income tax even after the application of Public Law 86-272 (Interstate Income Act, 15 U.S.C. §§ 381-384) may elect to file a Georgia consolidated return on an originally filed income tax return by the due date of the return, including extensions. Failure to make the election by such time will result in the filing of separate income tax returns for the applicable taxable year. The election is irrevocable and binding on both the Georgia affiliated group and the Georgia Department of Revenue for five years. 

The Georgia Department of Revenue announced it will begin processing 2024 individual income tax returns on Monday, February 3, 2025. The deadline to file these returns is May 1, 2025; the deadline is extended due to Hurricane Helene relief. Most error-free, electronically filed returns are processed within five business days of receiving the return and most refunds are issued within 21 days from the date a taxpayer files their return. All first-time Georgia income tax filers, or taxpayers who have not filed in Georgia for at least five years, will receive their refund in the form of a paper check. (2025 Tax Season Information, Ga. Dept. of Rev., 01/28/2025.) 

Illinois

The Illinois Department of Revenue (DOR) issued a General Information Letter (GIL) regarding the tax treatment of modular components manufactured by a construction contractor and incorporated into real estate. When a construction contractor manufactures modular components that it will incorporate into real estate, the tax base is the amount the contractor pays for materials incorporated into the components. As the end user, the construction contractor owes Use Tax on its cost price of materials permanently affixed to real estate, unless tax was already paid to another state. The contractor’s customers do not owe Use Tax, though the contractor can pass along its tax costs through higher pricing or tax reimbursement provisions in contracts. For subcontractors acting as construction contractors, they owe Use Tax on materials they purchase to incorporate into real estate projects. (Ill. Dep’t of Revenue, Gen. Info. Letter, No. ST-24-0033-GIL, 10/15/24) 

The Illinois Department of Revenue (DOR) Dec. 27, 2024, issued a General Information Letter (GIL) providing guidance on sales and use tax for construction contractors selling manufactured (mobile) homes. The GIL explains that the tax treatment depends on whether the homes are sold with or without installation. For homes sold without installation, the contractor must collect sales tax from the buyer and report it on Form ST-556. For homes sold with installation by incorporating them into real estate, the contractor is considered the end user and must pay use tax on their cost price, reported on Form ST-1. The GIL provides details on specific exemptions, tax rates, reporting periods, and relevant regulations. (Ill. Dep’t of Revenue, Gen. Info. Letter, No. ST-24-0047-GIL, 12/27/24) 

The Illinois Department of Revenue (DOR) issued a general Information letter (GIL) concerning sale and use tax for computer software. The DOR states that the sale of computer software, including online video games, game extras, and in-game currency downloaded onto a customer’s computer in Illinois, constitutes the sale of taxable tangible personal property subject to retailers’ occupation tax. However, software provided through a cloud-based system, which is never downloaded onto a device, is not subject to tax. The letter also noted that software subscriptions as a service are not taxed in Illinois. (Ill. Dep’t of Revenue, Gen. Info. Letter No. ST-24-0044-GIL, 12/16/24) 

New Jersey

The Division of Taxation has updated its filing procedures for S corporations and their QSSS(es) so that they no longer have to file separate returns as they did in prior years. Effective for the 2024 tax year, the S corporation parent and its QSSS must now file the CBT-100S together. The Division’s Taxpayer Accounting Branch can help move tax payments so that if a QSSS has overpayments from a previously filed return or has made payments under its own account, the S corporation should request to transfer these funds before filing the tax return. The tax preparer should provide a spreadsheet showing: (1) QSSS name and identification number; (2) the amount of overpayments to be applied to the combined account; (3) and a list of payments to be transferred. The information may be sent by mail, by fax or by email. Taxpayers should include a cover letter and phone number with their information. (Moving QSSS Payments to Parent, N.J. Div., of Taxation, 03/03/2025.) 

New Mexico

The New Mexico Taxation and Revenue Department issued a ruling addressing the taxability of various fees charged by taxpayer, a marketplace provider. The Department ruled that fees deducted from the sales proceeds are included in taxpayer’s taxable gross receipts as the marketplace provider, and that warehouse fees are deductible if taxpayer acts as a carrier or agent of a carrier providing services under a single transportation contract. The ruling also provides guidance on sourcing of marketplace provider fees and the applicability of deductions for transportation and warehouse services. (N.M. Tax’n & Revenue Dep’t, Ruling No. 401-24-03, 12/11/24) 

A taxpayer was liable for gross receipts taxes because he delivered services at hospitals in New Mexico. The taxpayer was a doctor employed by an out-of-state staffing company as an independent contractor who worked in New Mexico. The taxpayer claimed he was exempt from gross receipts taxes because he provided services outside New Mexico for the staffing company although the “product” of his services was first used in New Mexico. However, the service provided by the taxpayer was medical treatment which was performed in New Mexico. (Adnan v. N.M. Tax. and Rev. Dept., N.M. Tax. and Rev. Dept. Decision and Order, No. 25-01, 01/08/2025.) 

North Carolina

The North Carolina Department of Revenue (DOR) Nov.1, 2024 issued a Private Letter Ruling determining that a taxpayer’s subscription fees for access to digital videos, books, and audiobooks are subject to sales and use tax as the sale of certain digital property, unless the transaction qualifies for a bundled transaction exception. The DOR clarified that the taxpayer is not selling software as a service or an information service when providing access to digital content, as the customers are paying for the content itself and not the software used to deliver it. Thus, use of such software by the content providers does not allow the providers to avoid tax on their sales of certain digital property. (N.C. Dep’t of Revenue, Private Letter Ruling SUPLR-2024-0011, 11/01/24) 

South Carolina

The South Carolina Department of Revenue has revised its guidance on the Textiles Communities Revitalization Act to reflect the legislative changes over the last eight years since the legislation was originally passed. The ruling discusses the income and property tax credits available and explains what types of property are eligible for the credit. A textile mill site that qualifies as abandoned may be subdivided into separate parcels, and the parcels may be owned by the same taxpayer or different taxpayers. Each parcel is deemed to be a separate textile mill site for purposes of determining whether each subdivided parcel is considered abandoned. Sub-parcels that never had a structure related to textiles can qualify as textile mill sites provided that the original parcel qualified as a textile mill site. Generally, the amount of the credit is based on rehabilitation expenses incurred by the taxpayer. Rehabilitation expenses include: expenses or capital expenditures incurred in the rehabilitation, renovation, or redevelopment of the textile mill site, including the demolition of existing buildings, environmental remediation, site improvements and the construction of new buildings and other improvements on the textile mill site, but excluding the cost of acquiring the textile mill site or the cost of personal property located at the textile mill site. (South Carolina Revenue Ruling No. 25-1, 02/10/2025.) 

Tennessee

The Tennessee Department of Revenue has ruled that an electric store sign was tangible personal property and not real property. The seller manufactures and installs electric signs. The seller charged sales tax on both the sales of the sign and its installation. The customer is a tenant of the building in which it operates the store. When the customer leaves, the sign will be removed. The sign is attached to the building with bolts and anchors. Due to the size and location of the sign, the sign should be removed by skilled sign technicians with access to a crane/bucket truck for access. The Department ruled that because the intent of the parties was to have the sign removed after the customer leaves the location, the electric sign was tangible personal property and not realty. (Tennessee Letter Ruling No. 24-11, 11/26/2024 (released January 2025)) 

Wisconsin

The Wisconsin Department of Revenue follows the federal Internal Revenue Code as amended to December 31, 2022 with certain exceptions. Tax law changes that took effect for the 2024 tax year include an increase of the refundable portion of research credit to 25%; changes to the financial institution commercial loan income exemption; changes to the eligibility requirements to be (re)certified by the Wisconsin Economic Development Corporation (WEDC) as a qualified new business venture for purposes of claiming the angel investment tax credit; and changes to the eligibility requirements for the business development tax credit and enterprise zone tax credit. In addition, beginning with tax year 2024, the Department is accepting Form 1099 submissions using the IRIS schema adopted by the IRS. (Wisconsin Dept. Rev. Tax Bulletin No. 228, 01/01/2025.) 

Tax law changes that took effect for the 2024 tax year include the new blind worker transportation services credit, an expanded additional child and dependent care credit, an expanded capital gains exclusion on the sale of farm assets to a family member, changes to deduction limits on college savings account contributions, and an increase in the Wisconsin subtraction for tuition and fees to $7,333 from $6,976. A nonresident of Wisconsin who is an owner (partner, member, shareholder, or beneficiary) of a pass-through entity may request an exemption from Wisconsin’s pass-through withholding tax by filing Form PW-2, which must be filed electronically through My Tax Account by the following due dates: for a 2024 calendar-year tax-option (S) corporation, LLC, or partnership, by January 31, 2025; and for a 2024 calendar-year estate or trust, by February 28, 2025. (Wisconsin Dept. Rev. Tax Bulletin No. 228, 01/01/2025.) 

The Wisconsin Department of Revenue has updated its publication regarding the taxability of digital goods. The publication clarifies that a digital good may include prewritten computer software that is accessed through means other than tangible storage media (e.g., a video game accessed online). However, a digital good does not include charges for remote access to prewritten computer software if the software is used to process a client’s data and the processing is under the direction and control of the service provider. The publication also reflects the exemption for real estate broker memberships that went into effect on June 1, 2024 as well as recent rate changes, including the 0.5% county sales and use tax by Racine County effective April 1, 2025 and the 0.5% county sales and use tax by Manitowoc County effective January 1, 2025. (Wisconsin Dept. Rev. Tax Publication No. 240, 01/01/2025.) 

February 2025 Edition

Georgia

In his State of the State Address delivered January 16, 2025, Georgia Governor Brian Kemp proposed a further cut of 20 basis points to the state’s 5.39% income tax rate, bringing it down to just 5.19% in 2025.

Indiana

The Indiana Department of Revenue ruled that an out-of-state video game company’s sales of monthly online subscriptions, access to in-game items and virtual currency are not subject to sales tax because the items are not considered tangible personal property and do not meet the definition of specified digital products. (Indiana Revenue Ruling No. RST 2024-04, 01/07/2025.)

Michigan

L. 2025, H4906 (P.A. 207), effective 04/17/2025, amends the sales tax exemption for data center equipment by extending the sunset date of the exemption from December 31, 2025 to December 31, 2050. The bill establishes the same sales tax exemption for enterprise data centers, which would generally be data centers that met specific requirements related to capital investment and the creation of new jobs in the state, through December 31, 2050 and establish the same sales tax exemption for an enterprise data center located on a brownfield redevelopment or former electric power plant through December 31, 2065. The bill also allows to data centers on brownfield property or industrial sites once used as a power plant a sales tax exemption of data center equipment sold to either: (1) a qualified entity or its affiliates for assembly, use, or consumption in the operations of an enterprise data center subject to a certificate; or (2) a person engaged in the business of constructing, altering, repairing, or improving real estate for others to the extend the data center equipment was affixed or was made a structural part of an enterprise data center subject to a certificate. The bill provides the Michigan Strategic Fund Board cannot issue any new certificates of exemption after December 31, 2029. This sunset does not affect any existing certificates of exemption in effect on December 31, 2029.

On January 17, 2025, Michigan Governor Gretchen Whitmer signed legislation that amends provisions of the state’s flow-through entity (FTE) tax, including the conditions under which penalties and interest are not assessed and the date on which a taxpayer must elect pay the tax. The bill also amends provisions related to the required disclosures to members of the FTE and allows the Department of Treasury to require an individual to provide reasonable proof in order to claim the credit against the individual or corporate income tax liability for the amount of FTE tax paid. L. 2025, H5022 (P.A. 216), effective 04/02/2025, operative as stated.

Minnesota

The Minnesota Department of Revenue announced the brackets and amounts of the additional minimum tax or fee applicable to taxable corporations (C corporations and S corporations) and partnerships, as indexed for inflation for tax year 2025. The additional minimum tax for 2025 is based on the sum of the entity’s Minnesota property, payroll and sales or receipts amounts as follows: if the total amount of the entity’s Minnesota property, payroll and sales is less than $1,250,000, the minimum fee is zero; if the total is in the $1,250,000 to $2,509,999 bracket, the minimum fee is $260; if the total is in the $2,510,000 to $12,539,999 bracket, the minimum fee is $750; if the total is in the $12,540,000 to $25,069,999 bracket, the minimum fee is $2,510; if the total is in the $25,070,000 to $50,139,999 bracket, the minimum fee is $5,020; and if the total is $50,140,000 or more, the minimum fee is $12,540. (Minimum Fee, Minn. Dept. Rev., 01/15/2025.)

New Hampshire

The New Hampshire Department of Revenue Administration released guidance on the repeal of the 3% interest and dividends tax paid by New Hampshire residents, repealed by L. 2023, H2, effective January 1, 2025. (New Hampshire Technical Information Release No. 2025-001, 01/21/2025)

New Jersey

L. 2025, S1323 (c.2), effective 01/23/2024, makes changes to the New Jersey Aspire Program. These changes include the reduction from 15 years to 10 years the maximum eligibility period for developers of mixed use and commercial redevelopment projects to use a tax credit following credit approval by the New Jersey Economic Development Authority. The law also makes changes to the areas eligible to qualify for Aspire Program benefits including providing tax credit eligibility to the Trenton-Mercer Airport and the area within a one-mile radius of the outermost boundary of the airport’s terminal and qualifying other areas for tax credit eligibility. Additionally, the law increases from 75% of the face value of the tax credit to 85% the minimum price of tax credits purchased by the Department of the Treasury from developers wishing to sell unused portions of their tax credit awards.

New York

The New York Department of Taxation and Finance announced that the thresholds at which a corporation and unitary group are deemed to be deriving receipts from activity in New York State and in the Metropolitan Commuter Transportation District (MCTD) for imposing the Article 9-A franchise tax and the MTA surcharge will remain at $1,283,000 for the periods January 1, 2025, through December 31, 2025. The receipts thresholds to be used in determining if members of a unitary group that meet the ownership requirements under Tax Law section 210-C are deriving receipts from activity within New York State and in the MCTD remains at $12,000. (Deriving Receipts for Article 9-A Tax and MTA Surcharge, Dept. of Tax. and Fin., 12/12/2024.)

Pennsylvania

Under Pennsylvania law, a business with property or inventory in Pennsylvania is subject to Pennsylvania taxes. This requirement applies to online retailers with inventory stored at a distribution or fulfillment center located in Pennsylvania. Income and applicable sales taxes should be reported and remitted to the Department of Revenue. The Department of Revenue is offering a Voluntary Compliance Program for any business that has inventory or stores property in Pennsylvania but is not registered to collect and pay Pennsylvania taxes. This program offers a limited lookback period and penalty relief when the business becomes compliant. Taxpayers that choose to participate in this program will not be liable for taxes owed prior to January 1, 2019. Taxpayers who participate in the program also will be given penalty relief for any non-compliance for past due tax returns that were not filed and taxes that were not paid.

Pennsylvania Treasurer Stacy Garrity announced the launch of the new online Tax Appeal Portal to streamline Pennsylvania’s tax appeal process. Taxpayers and tax practitioners filing appeals with the Pennsylvania Department of Revenue (DOR) through the Board of Finance and Revenue (BF&R) can now find all applicable forms in one online location. Among other features, this online portal allows users to: file a petition; upload supporting documents; request a hearing continuance; request a compromise directly with the DOR; and request a mediated settlement conference (for appeals filed on or after January 27, 2025). (Treasurer Stacy Garrity Launches New Portal to Simplify Pennsylvania Tax Appeals, Pa. Treasury, 01/24/2025.)

Tennessee

The Tennessee Department of Revenue updated the franchise and excise tax manual: (1) with respect to new Schedule I (Disregarded Entities) which must be included when a disregarded entity is included as part of the taxpayer’s return; (2) relating to new Schedule I which must be completed by financial institutions and captive REITS filing Form FAE 174 to report the combined group members included in the tax return (including disregarded entities); (3) clarifying that the acquisition of an existing affiliated group by a non-affiliate terminates the existing group’s CNW election (unless the acquiring entity has its own CNW election in effect at the time of the acquisition); (4) to confirm the Department’s position on sourcing sales of tangible personal property to intermediaries such as distributors or wholesalers; and (5) the franchise tax proration calculation when a unitary group member enters or exists a financial institution unitary group during the tax year. (Tax Manual Updates, Tenn. Dept. of Rev., 12/01/2024; Franchise and Excise Tax Manual, Tenn. Dept. of Rev., 12/01/2024.)

The Tennessee Department of Revenue modified its sales and use tax manual with the following updates: (1) charges by a taxidermist for taxidermy activity are exempt from the sales and use tax; (2) the term software used in the operation of a date center is inclusive and encompasses a number of business functions such as accounting, human resources and customer information; (3) sales tax should be charged to TennCare for covered products under the TennCare Diaper Benefit; and (4) sales of electricity at electric vehicle charging stations are subject to sales and use taxes. (Tax Manual Updates, Tenn. Dept. of Rev., 12/01/2024; Sales and Use Tax Manual, Tenn. Dept. of Rev., 12/01/2024.)

The Tennessee Department of Revenue issued a ruling holding that drop shipments must be sourced to where they were shipped. This was the case even though the products being drop shipped to the ultimate customers were first sent to a third-party facility where they were held prior to shipment to the ultimate customers. Since the third-party facility never obtained title or an interest in the products, the shipments to the third-party facility were not reported as sales. It was only when the goods were shipped to the customer of the purchasers that sales to the purchasers were recorded and those sales must be sourced to where the goods were shipped. (Tennessee Revenue Ruling No. 24-12, 12/19/2024.)

The Tennessee Department of Revenue ruled that various services provided by a firm are not subject to sales and use tax. The services are provided to companies to assist and allow a customer’s employees to be recognized and rewarded for performing well, reaching employment milestones and/or exhibiting behaviors that demonstrate company values. Specifically, the Department ruled that: (1) services associated with the creation of customer specific employee recognition solutions which include consulting, startup and website design drafting fees were not taxable services because the true object of the transaction was administration of the employee recognition program; (2) transaction fees charged by the taxpayer when certificates are awarded are not a taxable service; (3) gift cards sold by the taxpayer for reward points are not taxable; and (4) merchandise provided to the customer’s employees is taxable. (Tennessee Letter Ruling No. 24-10, 11/26/2024.)

Virginia

The Virginia Department of Taxation ruled that leases of heating, ventilation, and air conditioning (HVAC) systems to residential customers from a taxpayer’s commonly controlled company are taxable since the agreement between the parties specifies that the HVAC units are tangible personal property. In reaching its conclusion, the Department noted that a Virginia Supreme Court case that provides three general tests in determining if an item of tangible personal property should be considered as a fixture stipulates that such tests are only used “in the absence of any specific agreement between the parties as to the character of a chattel upon the freehold.” Additionally, if a residential customer exercises the option to purchase the HVAC unit during or after the lease, that is a separate transaction subject to tax based on the purchase price. Further, the taxpayer was a consuming contractor in transactions involving furnishing and installing the HVAC units, and must either pay tax on the purchases or accrue and remit consumer use tax on the untaxed purchases. (Virginia Public Document Ruling No. 24-110, 11/14/2024.)

Washington

The Washington Department of Revenue issued guidance with respect to gains from investments in light of the state supreme court’s decision in Antio, LLC, et al. v. Wash. Dept. Rev. , Wash. S. Ct., Dkt. No. 102223-9, 10/24/2024 . In Antio, the court held that the business and occupations deduction for gains derived from incidental investments is limited to income that is earned through investments that are incidental to the main purpose of the taxpayer’s business. Taxpayers have the burden of proving that an investment activity is not the main business activity if the income from the activity exceeds the safe harbor. The deduction for amounts derived from incidental investments is not available to a banking business, lending business, or security business. In determining whether investment activity is incidental, a taxpayer’s facts and circumstances at and prior to the time of filing is relevant. The deduction does not generally apply to amounts received from loans, the extension of credit, revolving credit arrangements, installment sales, and similar interest income. (Investments, Wash. Dept. Rev., 01/14/2025.)

January 2025 Edition

Arkansas

The Arkansas Supreme Court has affirmed the circuit court’s grant of summary judgment to a corporate taxpayer, resulting in a substantial income tax refund. The taxpayer’s business was selling retail motor-fuel products and convenience-store items. To fund a spin-off of the taxpayer, the taxpayer’s new parent made a $650 million distribution to the existing parent using the proceeds from borrowed funds received from the taxpayer. The taxpayer then paid the interest expense on these borrowed funds. The taxpayer had allocated 100% of these interest expenses to Arkansas, its domicile state, and requested a refund. Because existing Arkansas law adopted the standard UDITPA definition of “business income” and “nonbusiness income” (Ark. Code Ann. 26-51-701), the court focused on the nature of the taxpayer’s business when determining whether activity is “business income” under the traditional transactional and functional tests. The court decided that the spin-off transactions and activity were not made in the regular course of the taxpayer’s business and the spin-off was not the acquisition, management, and disposition of property that constituted integral parts of the taxpayer’s regular business. (Hudson v. Murphy Oil USA, Inc., Ark. S. Ct., Dkt. No. CV-24-8, 12/12/2024.)

Georgia

The Georgia Department of Revenue (DOR) Nov. 25 issued a letter ruling on the application of sales and use tax to transactions involving prewritten computer software. The DOR ruled that the sale of prewritten computer software, delivered in a tangible medium (USB Keys) and picked up by a customer in Georgia, is subject to Georgia sales and use tax. The DOR also clarified that Georgia does not have a Multiple Point of Use (MPU) tax exemption, thus the sale of the software-loaded USB Keys is taxable, even if the software is ultimately used outside of Georgia. [Ga. Dep’t of Revenue, Letter Ruling SUT-2024-02, 11/25/24]

The Georgia Department of Revenue (DOR) Dec. 13 proposed a rule on digital products, goods and codes. The proposal addresses the sales and use taxation of specified digital products, other digital goods and digital codes. A remote public hearing will be held on Dec. 19 at 10:00 am. Comments on the proposed rule are due by Dec. 19. [Ga. Dep’t of Revenue, Reg. Section 560-12-2-.118, 12/13/24]

The Georgia Department of Revenue (DOR) issued information on the income tax changes. The information includes: 1) the state’s tax law conformity to federal changes in the Internal Revenue Code (IRC) for tax years 2021 to 2024; and 2) the adoption of House Bills and Senate Bills, their effective dates, and how they conform to the IRC. [Ga. Dep’t of Revenue, Income Tax Federal Tax Changes, 12/01/24]

Illinois

The Illinois Department of Revenue has issued a compliance alert to increase participant compliance in the Department’s direct pay permit program (DPP). Many participants are not in compliance with the record-keeping, filing, and payment requirements for purchases made under DPP. The Department will issue a notice of direct pay annual review to taxpayers reminding them of reporting obligations, and effective January 1, 2025, participants must complete an annual review of all transactions for the previous calendar year and submit confirmation of the review, no later than March 31, of the following calendar year. If the taxpayer was in business for less than 12 months during the calendar year, or part of the calendar year is under an active audit, the annual review must be conducted for the short-year period not under audit. Participants are responsible for filing Form ST-1-X (Amended Sales and Use Tax and E911 Surcharge Return) for any filing period where a transaction was incorrectly taxed. Failure to comply may result in a $6,000 penalty for the transactional review reporting period. (CA 2025-01, Ill. Dept. of Rev., 12/10/2024.)

The Illinois Department of Revenue has issued an informational bulletin to all persons who, in the ordinary course of business, lease or rent tangible personal property. Effective January 1, 2025, they are considered retailers subject to Illinois’ sales and use tax laws, in accordance with the Retailers’ Occupation Tax Act, and must register with the Department and pay tax on their lease or rental receipts. Leases of tangible personal property are considered sales at retail, and those who lease or rent property from Illinois businesses have tax itemized on receipts. Beginning January 1, 2025, taxpayers may use Form CRT-61 (Certificate for Resale) to claim an exemption on purchases of merchandise that will be leased or rented if the lease or rental of that item is subject to retailers’ occupation tax. Although tax does not apply to receipts prior to January 1, 2025, any amounts received on and after that date are subject to tax, including amounts received on contracts in place prior to January 1, 2025. The change does not impact leases or rentals of items that must be titled or registered with the state, such as motor vehicles. (Illinois Dept. of Rev. Info. Bulletin No. FY 2025-15, 12/01/2024.) 

City of Chicago

Chicago officially raised the personal property lease tax (sales tax) tax rate from 9% to 11% effective 1/1/25. This impacts sellers of software-as-a-service to customers in Chicago.

Maine

Maine Revenue Services has issued a notice discussing a recent law change affecting taxpayers engaged in the business of leasing or renting tangible personal property and/or electronically-transferred products. Beginning January 1, 2025, state sales tax is imposed on each periodic lease or rental payment paid by the lessee. For leases in effect, entered into, or renewed on or after January 1, 2025, lessors are required to charge and collect Maine sales tax from the lessee on each lease or rental payment. The notice also covers the sale price of payments; purchases for resale; prewritten computer software; automobiles, trucks, and vans; exemptions; and limited refund provisions. (Notice to Lessors of Tangible Personal Property: Maine Shifting to “Lease Stream” Sales Taxation Effective January 1, 2025, Maine Revenue Services, 12/01/2024.) 

Michigan

The Michigan Department of Treasury has issued a release updating the description of the procedures and standards governing the alternative apportionment relief provisions in parts 1 and 2 of Michigan’s Income Tax Act and in the Michigan Business Tax Act in response to the Michigan Supreme Court’s opinion in Vectren Infrastructure Services Corp. v. Department of Treasury , 999 NW2d 748, 512 Mich 594 (2023). (Michigan Revenue Administrative Bulletin No. 2024-24, 12/17/2024, replacing Michigan Revenue Administrative Bulletin No. 2018-28, 12/19/2018)

New York

L. 2024, S885 (c. 672), effective 04/21/2025, expands the definition of a hotel for sales tax purposes to include short term rental units. A short term rental unit is a short-term residential rental unit that is “an entire dwelling unit, or a room, group of rooms, other living or sleeping space, or any other space within a dwelling, made available for rent by guests for less than thirty consecutive days, where the unit is offered for tourist or transient use by the short-term rental host of the residential unit.” The law also specifies the persons who are required to collect the tax, in addition to adding provisions on remitting and collecting the tax, and registration requirements.                                                                     

Oregon

The U.S. Supreme Court has denied a request to review an Oregon Supreme Court decision which held that an out-of-state tobacco manufacturer removed itself from the safe harbor of P.L. 86-272 when its representatives went beyond soliciting orders in Oregon on behalf of wholesalers by taking prebook orders. The question presented to the court was whether P.L. 86-272 immunity applied for a company when it engages in otherwise protected activities in Oregon to solicit requests for orders from retailers if it also sends successfully solicited retailer requests for orders to wholesalers (i.e., the company’s customers) for wholesalers to accept and process, and, if ultimately fulfilled, to be fulfilled by the wholesaler from the wholesaler’s own inventory of product that it previously purchased from the company (i.e., the wholesaler makes the sale to the retailer). (Santa Fe Natural Tobacco Co. v. Dept. of Rev., Or. S. Ct., Dkt. No. SC S069820, 06/20/2024, cert. denied, U.S. S. Ct., Dkt. No. 24-551, 12/16/2024.)

South Carolina

The South Carolina Department of Revenue has issued a revenue ruling to explain the tax credits for rehabilitating certified historic structures qualifying for the federal credit and historic residential structures located in South Carolina. S.C. Code Ann. § 12-6-3535(A) provides a nonrefundable tax credit of 10% against state income taxes and license fees, for taxpayers who qualify for the federal income tax credit for making qualified rehabilitation expenditures for a certified historic structure located in South Carolina. Taxpayers can elect to take a 25% South Carolina credit instead of 10%, but the 25% credit is limited to $1 million for each certified historic structure. S.C. Code Ann. § 12-6-3535(B) provides a nonrefundable income tax credit for taxpayers who are not eligible for the federal credit. The credit is for 25% of the rehabilitation expenses for a certified historic residential structure located in South Carolina. The ruling discusses eligible properties, the application fees, certification of additional work and provides answers to the most frequently asked questions. (South Carolina Revenue Ruling No. 24-6, 12/16/2024.)

Tennessee

The Tennessee Department of Revenue has issued a letter ruling that states that a successor taxable entity in an IRC § 368(a)(1)(F) reorganization assumes the tax attributes of its predecessor taxable entity including items such as net operating losses (NOLs) and tax credits. While, NOLs and tax credits, may generally only be claimed by the taxable entity that incurred the losses or generated the credits, there is an exception if the predecessor taxable entity merges into a taxable entity with no activity, assets or liabilities prior to the merger. (Tennessee Letter Ruling No. 24-09, 11/05/2024.)

The Tennessee Department of Revenue has updated its taxability matrix to reflect the Streamlined Sales and Use Tax Agreement as amended through October 8, 2024. The matrix indicates that a remote seller who is registered to collect sales tax in Tennessee has an obligation to remit consumer’s use tax on its own property such as catalogs and samples delivered into Tennessee. (Tennessee Taxability Matrix, Tax Administration Practices, 12/30/2024.)

Contributors

Brian Strahle, Partner and National Practice Leader, State & Local Tax

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