Here’s what HIVE AI had to say about “State-specific tax law variations and updates”:
State-specific tax law variations and recent updates
Below is a concise, practitioner-focused roundup of notable state tax changes recently enacted or taking effect, plus how to monitor and plan for continuing variation across states.
Mid‑year 2025 state changes taking effect July 1
Excise and transportation taxes
- Multiple states updated motor fuel excise tax rates on July 1 via statutory increases, inflation indexing, or average wholesale price adjustments; several also raised EV fees. Colorado increased its Road Usage Fee, and Hawaii enacted a new Road Usage Charge for EVs. Cannabis, tobacco, and nicotine taxes rose in several states, and some states modified sports betting tax structures and advanced extended producer responsibility programs. 1
Sales and use taxes
- Arkansas expands its data center sales tax exemption; Kansas enacts a new data center exemption; Minnesota repeals its data center exemption. Maryland begins applying a 3% sales tax to certain B2B services, including data and IT services. Mississippi reduces the state rate on groceries. 1
Banking and excise specifics
- South Dakota conforms its bank franchise tax to the IRC as of Jan. 1, 2025 (effective July 1), keeping alignment for financial institutions. Tennessee imposes a 10% wholesale tax on vapor products and exempts certain on‑premise winery sales from the liquor‑by‑the‑drink tax beginning July 1. 1
Retroactive and other 2025 changes
Retroactive to January 1, 2025
- Michigan: New refundable R&D credit starts for tax years beginning on/after Jan. 1, 2025, with tiered rates by firm size. 1
- North Dakota: Caps annual local property tax revenue increases at 3%; raises homestead credit to $1,600 and the disabled veterans/surviving spouses credit to $9,000. 1
- Arkansas: Homestead property tax credit increased from $500 to $600 per parcel; NIL income excluded from individual income tax. 1
Other state highlights
- Wyoming: Clarifies occasional/isolated sales (e.g., yard or garage sales) are not taxable business activity requiring registration. 1
- Nevada: Sales tax exemption for infant and adult diapers effective Jan. 1, 2025; UI taxable wage base rises to $41,800 in 2025. 2
- New Hampshire: Repeals interest and dividends tax effective Jan. 1, 2025. 2
- Georgia: Corporate income tax rate reduced to 5.39% for tax years beginning on/after Jan. 1, 2024. Illinois: NOL cap increased to $500,000 for TY 2024–2027; sports betting excise tax moved to a 20%–40% graduated structure effective July 1, 2024. 2
- Alabama: From Oct. 1, 2025, nonresidents working in AL 30 days or fewer receive filing/withholding relief; state food sales tax drops from 3% to 2% on Sept. 1, 2025; personal property tax de minimis exemption rises to $100,000 (Oct. 1, 2025); Alabama retroactively decouples from federal §174 capitalization for 2024, allowing immediate expensing of R&E. 1
Planning around federal–state conformity
Why state conformity matters in 2025
- Federal changes (e.g., OBBBA’s expensing for §168(k)/§168(n)/§174A) often flow through to states, but many states conform on a rolling or fixed date basis, and some explicitly decouple (e.g., bonus depreciation, §179 caps). Expect variation until legislatures update conformity or enact modifications. 3
Action steps to model state effects
- Review each filing state’s conformity date and decoupling provisions for:
- Bonus depreciation and full expensing
- §179 expensing thresholds and phase‑outs
- §174 domestic R&E expensing vs. capitalization
- Treatment of new federal deductions/credits impacting state base
- Use state DOR bulletins or legislative trackers to confirm effective dates and retroactivity before filing. 3
Multistate withholding and unemployment interfaces
Withholding and filing exposure for short‑term work
- States set their own nonresident day thresholds; Alabama’s new 30‑day threshold for nonresident workers reduces compliance friction starting Oct. 1, 2025. Verify thresholds in other states to avoid unintended withholding and filing. 1
FUTA credit and state UI law changes
- State UI law changes can affect FUTA credit reduction calculations; where law changes occur mid‑computation period, federal law applies pro‑rata by period segments within the 12‑month window ending Oct. 31. 4
State personal income tax and itemized deduction interactions
SALT deduction planning at the federal level and spillovers
- With federal SALT cap policy changing under OBBBA, state resident taxpayers should model the interplay with higher local tax burdens. States differ on whether they allow a state itemized deduction for SALT or offer workarounds (e.g., PTE taxes). Keep an eye on conformity and separate state‑only limitations. 3
How I can tailor this to you
Provide your footprint and I’ll build a state matrix
- List your entity types, states where you file, and 2025–2026 activities:
- Anticipated capital investments, R&D spend, data center or manufacturing initiatives
- Remote/nonresident work patterns by state and day counts
- Sales tax exposure for services, digital goods, and data center equipment
- I’ll return a customized grid showing conformity status, effective dates, decouplings, nexus thresholds, and specific filing adjustments needed per state with citations to current authority.
Ongoing monitoring
- Many states are still finalizing FY 2026 budgets; expect additional changes not yet reflected. Re‑check legislative updates before quarter‑end estimates. 1
Sources
1 – Tax Foundation 📄 Summarize
2 – Tax Foundation 📄 Summarize
3 – Tax Foundation 📄 Summarize
4 – IRC § 3304(e) 📄 Summarize
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