State Tax News & Views: $25,000 SALT Deduction Cap? State Weed Taxes. Sundance tax credits.

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.

Republicans target $25,000 SALT cap as Trump tax plans solidify - Nancy Cook, Bloomberg via InvestmentNews:

Republicans are in the process of drafting a tax bill behind closed doors that includes an increase of the state and local tax deduction to as high as $25,000 for an individual, according to people familiar with the plan.

A sizable increase to the current $10,000 limit on SALT write-offs would represent a major political victory for a crucial group of swing-district House Republicans representing the New York City area and southern California, who have made their votes for a broader tax cut bill contingent upon securing a bigger deduction.

The plan, which is still in the process of being drafted and is not final, also includes a renewal of President Donald Trump’s 2017 tax reductions for individuals and closely held businesses as well as some of his campaign tax pledges, the people said, requesting anonymity to discuss private matters.

SSTGB Panel Recommends Sanctions on Georgia, Ohio, Nebraska - Emily Hollingsworth, Tax Notes ($):

Nebraska was determined to be out of compliance with section 308 of the SSUTA, which prohibits states from applying multiple state sales tax rates to personal property or services. Nebraska in 2023 enacted legislation (L.B. 727) that allows for a special 2.75 percent sales tax rate to be applied in designated locations with qualified economic development projects.

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Ohio was found to be out of compliance with section 322 of the SSUTA, relating to the state's sales tax holiday. The state announced in May 2024 that its annual sales tax holiday would be expanded to include a variety of tangible personal property items valued at $500 or less. Under the SSUTA, sales tax holidays can apply only to items listed in Part II and Part III of its library of definitions, which include clothing and school supplies.

The article does not state the form the sanctions might take.

Recreational Marijuana Taxes by State, 2025 - Adam Hoffer and Jacob Macumber-Rosin, Tax Foundation.

Approaches to tax structure vary significantly across states. Some states tax by weight, some by price, and others by THC content. Ad valorem taxes are simpler but are associated with greater revenue volatility and do not target any specific harm-causing element. Ad quantum taxes on weight or quantity produce more stable revenues and better target the harm-causing element, but do not account for potency. Ad quantum taxes based on THC content most directly target the harm-causing element, but this adds complexity to the tax and the technology to measure THC content is often too expensive to make this option viable yet.

State-By-State Roundup

California

LA-Area Cities Pass Seattle With Highest Sales Taxes in US - Maxwell Adler, Bloomberg ($):

Palmdale and Lancaster, located in northern Los Angeles County, raised their rates to 11.25% from 10.25% following voter approval of a 0.75% hike in both cities last year. The new rates also include a quarter-cent boost OK’d by county voters in November for homelessness programs.

With the increases, the two cities surpass Seattle, which had the highest sales tax rate in the country at 10.35% among cities with more than 100,000 people. Nationwide, California ranks eighth-highest, with an average combined state and local sales tax rate of 8.8%, according to the Tax Foundation. Unincorporated parts of Los Angeles pay 9.75%.

Colorado

Colorado Lawmakers OK Film Fest Tax Breaks as Sundance Picks Boulder - Emily Hollingsworth, Tax Notes ($):

The Sundance Institute announced March 27 that Boulder will be the film festival's new site beginning in 2027.

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Under H.B. 25-1005, global film festivals that locate to the state, as well as smaller Colorado-based film festivals, would be eligible for refundable income tax credits over a 10-year period, beginning January 1, 2027.

Florida

Florida House pushes for major sales tax cut amid Republican infighting - Forrest Saunders, ABC Action News:

Despite resistance from prominent Republicans, the Florida House is pushing ahead with a proposal to reduce the state’s sales tax by 0.75%. While the measure could lead to billions in savings, it faces significant hurdles before becoming a reality.

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The proposal, however, does not align with Governor DeSantis's vision. He has been advocating for property tax cuts for homeowners, a policy he touted during a Monday press conference in Orlando.

A Risky Proposition: Weakening Local Governments by Eliminating Property Tax Revenue - Estean Leonardo Santis, Florida Policy Institute. "In a densely populated state like Florida, if policymakers wanted to eliminate property taxes, they would need to raise $43 billion (or $2,015 per capita) to maintain public services currently funded with property tax revenue."

Idaho

Idaho Enacts Additional Property Tax Relief - Emily Hollingsworth, Tax Notes ($). "H. 304, signed by Little on March 26, took effect upon enactment and allocates $50 million every year to the Homeowner Property Tax Relief Account and $50 million to the School District Facilities Fund."

Indiana

Ind. To Provide Tax Breaks For WNBA All-Star Game, Events - Zak Kostro, Law360 Tax Authority ($). "S.B. 314, which Republican Gov. Mike Braun signed Tuesday, extends an existing state and local tax exemption for activities relating to the NFL Super Bowl, NCAA Men's and Women's Final Fours and NBA All-Star Weekend to include the WNBA All-Star Weekend, according to a fiscal impact statement."

Iowa

Iowa Bill Clarifies Withholding on Sports Betting Winnings - Emily Hollingsworth, Tax Notes ($):

S.F. 605 also clarifies that state income tax will be withheld on sports wagering winnings when federal income tax is required to be withheld on the same winnings.

The bill takes effect on January 1, 2026.

According to the Department of Revenue's memo for the bill, Iowa income taxes are currently required to be withheld on sports wagering winnings if the winner is a nonresident but placed the bet and received the winnings in the state. There is currently no sports wagering withholding requirement for Iowa residents.

Louisiana

Louisiana Voters Reject Tax Changes to State Constitution - Michael Bologna, Bloomberg ($). "The proposed revisions to the constitution included language that would have: required a two-thirds vote of the Legislature for any new tax, exemption, deduction, or credit; frozen the sales tax exemption on groceries; replaced the graduated income tax with a flat rate capped at 3.75%; granted taxpayers older than 65 an additional standard deduction; consolidated certain state trust funds; and provided a permanent increase to teacher salaries."

Maryland

Maryland House OKs Budget With IT Tax, New Top Tax Rates - Kennedy Wahrmund, Tax Notes ($).

H.B. 352 includes a 3 percent sales tax on information technology and data services. The tech tax would apply to companies like Wix and Amazon Web Services, aligning Maryland with other states that have adopted the levy.

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The bill would also establish two new top income tax rates for the state's top earners. Single filers earning between $500,000 and $1 million would be taxed at 6.25 percent and those with income over $1 million at 6.5 percent; the income thresholds for joint filers would be $600,000 and $1,200,000. The budget would also increase the standard deduction to $3,350 for single filers and $6,700 for joint filers.

The budget would also hit corporations with waters-edge combined reporting.

Massachusetts

Mass. Rule Would Narrow P.L. 86-272 Tax Shield On Cookies - Paul Williams, Law360 Tax Authority ($):

The state Department of Revenue floated a rule Friday that would consider the placement of certain cookies on a customer's electronic device to exceed the tax protections of the Interstate Income Act of 1959. That law, more commonly known as P.L. 86-272, shields businesses from a state's tax on net income when their only business activities in that state are soliciting orders of tangible personal property.

Under the proposed rule, using cookies to "gather customer search information used to adjust production schedules and inventory amounts, develop new products, or identify new items to offer for sale" would go beyond solicitation and therefore result in a business not being able to claim P.L. 86-272 protections.

Minnesota

Taxes committee considers governor’s sales tax changes, other proposals - Rob Hubbard, Minnesota Legislature:

Gov. Tim Walz wants to lower the state’s sales tax rate by 0.075%. But the lost revenue from that change would be more than made up for by new sales taxes on accounting, banking, brokerage and legal services, according to Revenue Department estimates.

That’s all part of the governor’s tax bill, HF2437, which is being carried by Rep. Greg Davids (R-Preston) and was presented to the House Taxes Committee on Wednesday.

Montana

Montana Governor Champions Income Tax Cuts, EITC Increase - Kennedy Wahrmund, Tax Notes ($). "Gianforte joined Americans for Prosperity (AFP) at a March 28 rally at the state capitol to advocate for S.B. 323. The bill, introduced February 13 by Sen. Josh Kassmier (R), proposes to reduce the top marginal income tax rate from 5.9 percent to 5.4 percent in tax year 2026 and to 4.9 percent in tax year 2027. The top rate currently begins to apply at relatively modest income levels, such as $21,100 or more for single filers. The bill would also increase the state EITC from 10 percent to 15 percent of the federal credit."

South Carolina

South Carolina Bill Proposes Flat Income Tax - Kennedy Wahrmund, Tax Notes ($):

H. 4216, introduced March 25 by House Speaker G. Murrell Smith (R), is intended to simplify the state tax code by collapsing its three income tax brackets and replacing them with a flat 3.99 percent rate beginning in tax year 2026. The state's current rates are 0 percent, 3 percent, and 6.2 percent.

The legislation also proposes further rate reductions contingent on revenue threshold triggers. If all triggers are met, the flat rate would be phased down to 2.49 percent.

South Carolina is currently one of a few states that use federal taxable income as the basis for calculating state individual income tax liability. The bill would also broaden the state tax base by switching the starting point to federal adjusted gross income.

Almost 60% of SC taxpayers would owe more income taxes for 2026 under GOP bill - Seanna Adcox, South Carolina Daily Gazette. "Legislation touted by GOP leaders as making South Carolina’s tax code appear more competitive by making it “fair and flat” would require most tax filers to pay more initially, according to an analysis by state fiscal experts."

Texas

Opportunities in the Texas Franchise Tax - Jennifer Barajas, Eide Bailly. "The Texas franchise tax is maddeningly complicated. Tax savings opportunities are hiding in that complexity. Alert businesses can lower their tax through exemptions, industry-specific deductions, and by accurately tracking deductible expenses."

Utah

Utah Repeals Transaction Threshold For Tax On Remote Sales - Zak Kostro, Law360 Tax Authority ($):

Republican Gov. Spencer Cox signed S.B. 47 on Tuesday. The legislation repeals a requirement for a seller to pay or collect and remit sales and use tax if they sell tangible personal property, products transferred electronically or services for storage, use or consumption in Utah in 200 or more separate transactions annually, according to the bill text.

By eliminating the transaction threshold, the legislation provides that only sellers with more than $100,000 of gross revenue annually from sales in Utah will be required to collect and remit the tax, according to the bill.

Virginia

Virginia Governor Proposes EITC Increase, One-Time Tax Rebate - Kennedy Wahrmund, Tax Notes ($):

The proposed amendments to the budget would allocate $1.1 billion to tax relief for one-time rebates of $200 for single filers and $400 for joint filers, to be distributed in October. The temporarily increased standard deduction of $8,500 for individuals and $17,000 for joint filers, scheduled to expire in 2026, would be made permanent and increased to $8,750 and $17,500, respectively.

Youngkin is also proposing to make the partially refundable EITC permanent and increase it to 20 percent of the federal EITC, and to extend from 2035 to 2055 the sunset date for the retail sales and use tax exemption for data centers.

Washington

Gov. Ferguson says he won’t sign a WA budget with a new ‘wealth tax’ - Jim Brunner, Seattle Times:

Gov. Bob Ferguson on Tuesday panned budget plans by legislative Democrats for relying on “far too much in taxes,” including a new wealth tax he warned could be overturned by courts.

Ferguson called the tax aimed at the state’s richest residents “novel, untested, difficult to implement” and warned it would face an immediate legal challenge, making it a bad choice to close the state’s multibillion-dollar budget shortfall.

A New State Payroll Tax Could Drive Jobs out of Washington - Jared Walczak, Tax Policy Blog. "Washington state lawmakers are considering a raft of new tax proposals, including a new 5 percent tax on employee payroll above the Social Security wage threshold, under which about 5,300 businesses (those with more than $7 million in payroll) would be liable at an estimated $2.3 billion a year in higher taxes."

Vegas Lures Millionaires Fleeing Wealth Tax in Washington State - Anna Edgerton, Bloomberg ($)

At a Christmas party last year in Las Vegas, nearly a dozen wealthy former residents of Washington state compared notes on their transition to the desert.

They agreed that the sunshine was nice. Even better was the feeling that the state of Nevada wanted them to be there.

Some rich people say that’s increasingly not the case in Washington, where Democratic state lawmakers are barreling toward a first-in-the-nation wealth tax on financial holdings to help close a roughly $13 billion budget deficit over the next four years.

Tax Policy Corner

We Hate Business - David Brunori, Law360 Tax Authority ($, free here on LinkedIn):

The latest bad idea is H.F. 2274, which would require the Minnesota Department of Revenue to publicly disclose corporate tax returns...

The Minnesota proposal would require the state tax commissioner to publicly disclose the corporate franchise tax returns of taxpayers with more than $250 million in aggregate gross sales or receipts in a given tax year. The disclosed information would include a corporation's corporate franchise tax return and any amended or adjusted returns; forms relating to calculation of income, apportionment and tax; and the corporation's identification numbers.

No state requires disclosure. Why? Because everyone knows that it is terrible government policy. Proponents think that they will highlight how little corporate tax is paid by big companies. Legislators can get that information on an aggregate basis from the Department of Revenue. But proponents are saying this is the only way to ensure corporations pay their fair share!

Tax History Corner

This is a good time to revisit the last major broad increase in tariffs - one that was legislated, rather than imposed as under presidential emergency powers. From the website of the State Department Office of the Historian:

During the 1928 election campaign, Republican presidential candidate Herbert Hoover pledged to help the beleaguered farmer by, among other things, raising tariff levels on agricultural products. But once the tariff schedule revision process got started, it proved impossible to stop. Calls for increased protection flooded in from industrial sector special interest groups and soon a bill meant to provide relief for farmers became a means to raise tariffs in all sectors of the economy. When the dust had settled, Congress had produced a piece of legislation, the Tariff Act of 1930, more commonly known as the Smoot-Hawley tariff, that entrenched the protectionism of the Fordney-McCumber tariff.

Britannica.com takes up the story:

Smoot-Hawley contributed to the early loss of confidence on Wall Street and signaled U.S. isolationism. By raising the average tariff by some 20 percent, it also prompted retaliation from foreign governments, and many overseas banks began to fail. (Because the legislation set both specific and ad valorem tariff rates [i.e., rates based on the value of the product], determining the precise percentage increase in tariff levels is difficult and a subject of debate among economists.) Within two years some two dozen countries adopted similar “beggar-thy-neighbour” duties, making worse an already beleaguered world economy and reducing global trade. U.S. imports from and exports to Europe fell by some two-thirds between 1929 and 1932, while overall global trade declined by similar levels in the four years that the legislation was in effect.

In 1934 President Franklin D. Roosevelt signed the Reciprocal Trade Agreements Act, reducing tariff levels and promoting trade liberalization and cooperation with foreign governments. Some observers have argued that the tariff, by deepening the Great Depression, may have contributed to the rise of political extremism, enabling leaders such as Adolf Hitler to increase their political strength and gain power.

Other than that, it worked out well.

State Tax News & Views: $25,000 SALT Deduction Cap? State Weed Taxes. Sundance tax credits.

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