Tax News Brief: 2025 Third Quarter

Welcome to Weaver’s specialty tax services newsletter. Each quarter we cover the top issues across our Specialty Tax Services practice, including state and local taxes (SALT), fixed assets, transaction tax advisory, tax provisions, tax credits, and international taxes.

©2025

State & Local Taxes

Sales & Use Tax | Severance Tax | Income/Franchise Tax

Sales & Use Tax

• The New York Department of Taxation and Finance determined that an out-of-state online retailer storing inventory in an unaffiliated in-state fulfillment center is not considered a vendor for sales tax purposes. This narrow interpretation may help limit when an out-of-state seller must register and collect.
• Maryland issued guidance on the digital advertising gross revenues tax, outlining definitions, filing and payment requirements, tax calculation methods and procedures for refund claims in accordance with statutory and regulatory law.
• Florida will repeal the state and local sales tax on commercial real property leases effective October 1, 2025. This can impact businesses leasing commercial space with a reduction in occupancy costs, eliminating a tax that has long placed Florida at a competitive disadvantage compared to other states.
• Maryland enacted a 3% sales tax on certain information technology and data services, such as data processing, software-as-a-service (SaaS), web hosting, software design and IT support, effective July 1, 2025. Businesses providing IT, software support or data-related services to Maryland customers will be required to collect and remit this tax starting on July 1, 2025.
• Illinois will offer a tax amnesty program from October 1 through November 17, 2025, waiving up to 100% of interest and penalties for most state taxes, including corporate and personal income taxes and sales and use taxes.
• The 24 Streamlined Sales Tax states, including Michigan, Ohio, Washington and Wisconsin, issued guidance clarifying that tariffs passed on to customers are included in the taxable sales price when the importer resells the product, while tariffs paid directly by the consumer to customs are not subject to sales tax.
• The Texas Comptroller ruled that telehealth services provided to employers, including health questionnaires, medication profiles and educational content are not subject to Texas sales tax, as the services require specialized knowledge and do not constitute taxable data processing or information services.
• Washington will impose retail sales tax on digital and nondigital advertising services, including design, production, placement, referrals and campaign monitoring, effective October 1, 2025, with exclusions for web hosting, certain media and out-of-home advertising.
• The Utah State Tax Commission upheld a sales and use tax deficiency based on the purchase price of an inoperable aircraft, ruling that tax was due on the purchase price once the aircraft was brought into Utah even though it was non-airworthy and destroyed.

Severance Tax

• Beginning July 1, 2025, through June 30, 2026, horizontal oil wells will receive an 80% severance tax exemption, while horizontal natural gas wells will be fully exempt.
• Colorado imposes a severance tax on oil and gas extraction to compensate for resource depletion and fund state programs. Oil and gas operators must withhold 1% of gross income for royalty owners, provide withholding statements by March 1 and file quarterly payments and annual returns by April 15, with a possible six-month extension.

Income/Franchise Tax

• California extended the elective pass-through entity tax (PTET) for tax years 2026-2031 and starting in 2026 will allow a PTET election even if the mandatory estimated payment is insufficient.
• The Colorado Department of Revenue issued updated guidance on PTE taxes, clarifying tiered partnership elections and confirming that nonresident individuals with only Colorado-source income reported by an electing PTE are not required to file a separate Colorado return.
• Hawaii amended its PTET rules for tax years beginning after 2024, requiring qualified members claiming a credit for PTE tax paid to add their share of the tax to their Hawaii taxable income.
• Illinois will allocate gains or losses from the sale of a partnership or S corporation interest for nonresident individuals based on the average of entity’s apportionment factors of the year of the sale and the two preceding tax years (effective for tax years ending on or after December 31, 2025).
• The Massachusetts Appeals Court upheld the Appellate Tax Board’s ruling that a nonresident’s gain from the sale of stock in a company he founded while a resident of the state is subject to Massachusetts personal income tax.
• Alabama has decoupled from IRC Section 174, effective for expenditures incurred on or after January 1, 2024, providing taxpayers the option to deduct R&E expenditures in the current year or follow the federal treatment that was in place prior to the TCJA amendments that took effect in tax year 2022.
• Louisiana will allow S corporations to be treated as pass-through entities for state tax purposes, permitting the filing of partnership returns instead of C corporation returns for tax years beginning on or after January 1, 2026.
• New York enacted rules requiring partnerships receiving federal audit adjustments or filing an administrative adjustment request after May 9, 2025, to report federal changes to the state within 90 days and partners to remit any additional tax within 180 days of the final federal determination or AAR filing.
• Indiana will offer a tax amnesty program through the Department of Revenue, waiving penalties and interest for taxpayers with unpaid tax liabilities for periods ending before January 1, 2023.
• New Hampshire will offer a tax amnesty program waiving penalties and 50% of interest for all taxes due but unpaid on or before June 30, 2025.
• New Jersey has adopted the Multistate Tax Commission’s updated P.L. 86-272 guidance, including a list of internet-based activities that may exceed the protections provided under the statute.
• The Albany County Supreme Court upheld New York’s adoption of the MTC’s updated P.L. 86-272 guidance for internet activities, ruling that the regulation does not violate the U.S. Constitution’s Supremacy Clause.
• California will require businesses earning income from savings, loan, banking or financial activities to apportion income using a single sales factor for tax years beginning on or after January 1, 2025.
• The Texas Comptroller ruled that the sale of bitcoin constitutes the sale of intangible property for franchise tax purposes. As a result, the initial purchase of bitcoin is not deductible under COGS and receipts from the sale of these assets are sourced to the payor’s location for purposes of the gross receipts factor.
• Washington will raise the “services and other activities” tax on October 1, 2025, standardize manufacturing, wholesaling and retailing rates at 0.5% in 2027, and has imposed a 2.9% surtax on individuals with long-term capital gains over $1 million starting January 1, 2025.

Fixed Asset/Cost Segregation

• The One Big Beautiful Bill Act (OBBBA) will permanently extend 100% bonus depreciation, expand it to qualified production and sound production property and increase the IRC Section 179 expensing limits.
• The OBBBA permanently extends 100% bonus depreciation for qualified property placed in service after January 19, 2025, increases the Section 179 expensing limit to $2.5 million and introduces a new bonus depreciation deduction.

International Taxes

• The OBBBA made changes to the Section 250 export incentive available to corporations, which for many companies may result in significant permanent tax savings. Key highlights include increasing the post-2025 deduction rate from 21.875% to 37.5%, removing the 10% fixed asset hurdle and eliminating required apportionment of interest and R&E against qualifying income. This is effective for tax years beginning after December 31, 2025.
• The OBBBA modifies the deemed dividend regime under Section 951A. Whether it will have a tax cost to taxpayers will in part depend on whether any increased inclusion amount can be eliminated through the high tax exception or managed through the utilization of foreign tax credits. Key unfavorable changes include removing the fixed asset hurdle, potentially increasing deemed dividends from controlled foreign corporations. Favorable changes include increasing the post-2025 deduction rate from 37.5% to 40% as well as changes to the foreign tax credit apportionment rules eliminating interest expense and R&E apportionment against 951A income.
• The European Court of Justice ruled that Malta’s “golden passport” program, allowing foreigners to obtain citizenship through investment, violates EU law and must end. Malta has pledged to review its rules following the decision.
• The proposed Taxpayer Assistance and Service Act includes several international provisions, such as consolidating FBAR and FATCA reporting through the IRS, increasing the exemption for foreign currency gains, raising the threshold for simplified foreign tax credit rules and more.
• Malaysia’s Inland Revenue Board released updated transfer pricing guidelines effective for 2023 and later, introducing new documentation thresholds, penalty structures and a simplified approach for low value-adding services.

Tax Credits & Incentives

• President Trump signed the OBBBA, making permanent many TCJA provisions, including lower individual tax rates, the increased standard deduction and the 20% QBI deduction.
• Texas has extended its R&D tax credit, increased the credit amount and aligned the definition of qualified research expenditures with line 48 of federal Form 6765, effective for tax years beginning January 1, 2026.
• The OBBBA reinstates immediate expensing of domestic R&E expenditures beginning in 2025 and allows eligible small businesses to amend 2022-2024 returns to reverse prior capitalization. All businesses may expense remaining unamortized Section 174 costs from those years, offering expanded flexibility and cash flow relief.
• The OBBBA includes provisions exempting up to $25,000 in cash tips and $25,000 in overtime pay ($12,500 for single filers) from federal income tax for 2025-2028, subject to income limits and joint filing requirements. The bill also raises certain 1099 reporting thresholds.

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