We’ve seen a few states dishing out tax notices so we want to bring one specific state to your attention! There are also many recent state and local tax updates we want to share. No heavy tax jargon here, just the highlights and what (if anything) you should do next.
1. Do You Know About Tennessee’s Business Tax?
While this tax isn’t new, out-of-state businesses often aren’t aware that Tennessee imposes a privilege tax on all businesses, both with a physical location in-state as well as out-of-state businesses, who have Tennessee gross receipts of $100k or more. Below are specifics regarding the Business Tax:
The Tennessee Business Tax is a separate tax from the more commonly known Tennessee Franchise & Excise Tax.
Gross receipts include both sales of tangible personal property and services.
The tax consists of a state tax and city tax. All business meeting the Tennessee sales threshold are typically subject to the state tax but only businesses that have a physical location within a city that has enacted the business tax are subject to the city tax.
Tax rates vary depending upon business classification and whether the business is a retailer or wholesaler, with a $22 minimum tax applied to all taxpayers.
Taxpayers are required to register for and remit the Business Tax through the Tennessee Department of Revenue’s online portal TNTAP (Tennessee Taxpayer Access Point).
Business Tax returns are due the 15th day of the 4th month following the close of the fiscal year.
If you believe you may have a filing requirement but are not registered and/or remitting Tennessee Business Tax Returns, we can help!
2. State Sales/Use Tax and Various State Fee DevelopmentsCalifornia implemented a new waste recycling fee effective 1/1/2026. It is a fee on covered battery-embedded (CBE) products. A CBE product is one that contains a battery that is not designed to be easily removed (i.e., has to be removed using proprietary tools). Smartphones are expected to present over 65% of state revenue. The fee is 1.5% of the retail sale price up to $15 per product. This fee is generally applicable to retailers of electronics (think phones, smartwatches, wireless earbuds), retailers of disposable vapes, and retailers of certain power tools.
The following are sales/use tax updates effective1/1/2026:
Arkansas No STATE sales tax on groceries. A local sales tax on groceries remains.
Illinois No STATE sales tax on groceries. Localities may choose to impose 1% but not all localities are required to do this.
Missouri M&E used to provide broadband services is now exempt from sales tax.
3. State Income Tax Rate Changes – Corporate & Individual
Several states have enacted changes to corporate and individual income tax rates taking effect on 1/1/2026. These changes underscore states’ continued commitment to tax reforms that boost competitiveness and drive ongoing economic growth.
Corporate Income Tax Rate Changes
(Top Marginal Rates)
| State | 2025 | 2026 | Noteworthy |
| Nebraska | 5.20% | 4.55% | Reducing to 3.99% by 2027 |
| North Carolina | 2.25% | 2.00% | Complete phase-out by 2030 |
| Pennsylvania | 7.99% | 7.49% | Scheduled to reach 4.99% by 2031 |
Individual Income Tax Rate Changes
(Top Marginal Rates)
| State | 2025 | 2026 | Tax Structure |
| Indiana | 3.00% | 2.95% | Flat Tax |
| Kentucky | 4.00% | 3.50% | Flat Tax |
| Mississippi | 4.40% | 4.00% | Flat Tax |
| Montana | 5.90% | 5.65% | Graduated Tax |
| Nebraska | 5.20% | 4.55% | Graduated Tax |
| North Carolina | 4.25% | 3.99% | Flat Tax |
| Ohio | 3.125% | 2.75% | Flat Tax |
| Oklahoma | 4.75% | 4.50% | Graduated Tax |
4. State Corporate Income & Franchise Tax Developments
States have enacted changes to apportionment rules, economic nexus thresholds, conformity to OBBBA, pass-through-entity tax regimes as well as phase-outs to state-level taxes. For businesses operating in multiple states, these developments may influence overall tax exposure and compliance obligations.
Apportionment
| State | Details |
| Arkansas | Effective for tax years beginning on or after 1/1/2026, SB 567 sources receipts other than tangible personal property using market-based sourcing. |
Economic Nexus
| State | Details |
|
Arkansas |
Effective for tax years beginning on or after 1/1/2026, SB 567 enacts a bright-line economic nexus threshold for non-resident corporations and partnerships if Arkansas receipts exceed $250,000. |
OBBBA Conformity
| State | Details |
| Delaware | Effective for tax year 2025 for C corporations and 1/1/2026 for S corporations and partnerships, HB255 decouples from IRC §168(k) and IRC §168(n). |
| Michigan | Effective for tax years beginning on or after 1/1/2025, HB4961 decouples from IRC §168(n), §174 and §179. |
Pass-Through Entities
| State | Details |
| Louisiana | Effective for tax year 2026, HB567 conforms to federal law by recognizing S corporations as pass-through entities, passing all income through to shareholders. |
| Virginia | HB1600 extends the elective Pass-Through Entity Tax (PTET) and the corresponding Refundable PTET Credit to expire on 1/1/2027. |
Tax Phase-Outs
| State | Details |
| Louisiana | Effective 1/1/2026, HB3 repeals Louisiana's Capital Stock tax. |
| Mississippi | Mississippi's Corporate Franchise Tax is continued to be phased-out, with complete repeal effective for tax years beginning on or after 1/1/2028. |
| Ohio | Effective 1/1/2026, HB96 repeals the School District Income Tax on estates. |
Next steps:
Depending on your situation, these updates could affect how much you owe, where you need to file, or whether there’s a planning opportunity worth exploring. We are available to discuss how these changes may apply to your specific circumstances.
Have Questions?
Reach out to Kari Brooke at kari.brooke@brixeyandmeyer.com