This Week in State Tax

California’s “Covered Battery-Embedded Product Fee” (CBE fee) became effective for retail sales and leases occurring on or after January 1, 2026. The fee applies at a rate of 1.5 percent of gross receipts from the retail sale or lease of new or refurbished products that contain an embedded battery not designed to be easily removed by the user with commonly used household tools (as defined in Senate Bill 1215). The fee is set by the Department of Resources Recycling and Recovery (CalRecycle), imposed on consumers, collected by retailers at the point of sale, and administered by the California Department of Tax and Fee Administration (CDTFA). The first quarterly return for the fee is due on or before April 30, 2026.

Following implementation, CalRecycle compiled a non‑comprehensive list of approximately 29,000 products that manufacturers, as part of their obligations under the law, have identified as including a covered battery. The list spans a range of products, including A/C units, ovens, stoves, microwaves, hot water heaters, washing machines, dryers, printers, scanners, guitars, earbuds, baby monitors, video game controllers, GPS units, coffee makers, and similar products. CalRecycle notes that it is not endorsing the accuracy of the lists submitted by manufacturers or otherwise confirming that the identified products are covered battery-embedded products, or that the list is complete.

As a reminder, retailers are prohibited from selling covered battery‑embedded products sourced from manufacturers that are not in compliance with the law which requires them to report to CalRecycle on affected products as well as provide a variety of information to consumers and retailers. Products must be clearly labeled with the name of the manufacturer or the manufacturer’s brand label. In addition, manufacturers must indicate the chemistry of the battery on a label or its website. For further information on the fee, please review our previous TWIST from September 2025 or contact Jim Kuhl.

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Indiana recently enacted a measure to remove the $500 penalty imposed on pass-through entities that failed to include nonresident partners, nonresident shareholders, or nonresident beneficiaries with no distributive share of Indiana income in the composite return. Prior to the passage of this bill, Indiana imposed the $500 penalty on pass-through entities that failed to include all nonresident owners in the composite return, even when an owner had no Indiana distributive share.  The penalty will still be applied to entities that fail to include nonresident owners with positive distributive share Indiana income in the composite return. Please contact Gianluca Pitetti or Ryan Dahlkamp with questions on Senate Bill 259. 

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The Utah legislature recently passed two bills that add to the growing efforts by states to impose tax on certain digital services. Senate Bill 287 would create a new tax on certain advertising activity, while Senate Bill 162 would clarify the taxability of streaming services in Utah.

Senate Bill 287 establishes a new tax on business entities that deliver “targeted advertising” into Utah and meet specified gross receipts thresholds. “Targeted advertising” in general terms means an advertisement delivered to an individual or audience in Utah, regardless of how delivered, which the seller sells to an advertiser through a bidding process, the seller obtains or develops individualized data profiles for the advertisement, and the recipient of the advertisement can interact with the advertisement (e.g., through a link or QR code) to access information or make a purchase.  To be subject to the tax, an entity must have $1 million or more in gross receipts from the delivery of targeted advertising in Utah, gross receipts of at least $100 million from all its targeted advertising, and at least 50 percent of its total gross receipts must be derived from targeted advertising. The tax is scheduled to take effect January 1, 2027, and the rate is currently set at 4.85 percent of applicable gross receipts.

Senate Bill 162 clarifies that Utah sales and use tax applies to a broad range of digital content and services by expressly imposing tax on amounts paid or charged for access to digital audio-visual works, digital audio works, digital books, and gaming services. This includes both streaming and subscription-based access services and applies regardless of how the content is delivered and whether a customer purchases single-use access (e.g., a one-time rental or pay-per-view event) or access through a subscription model, including subscriptions that may terminate upon the occurrence of a condition.

In addition to streaming and digital content, Senate Bill 162 also confirms that amounts paid or charged for the storage, use, or other consumption of prewritten computer software are taxable whether the software is delivered electronically, by “load and leave” (installed from a physical device without transferring the device itself), or accessed as seller‑hosted prewritten computer software (such as software-as-a-service). Both measures were delivered to Governor Cox on March 13. For any questions on these measures or other Utah matters, please reach out to Michael Larkin and Chris Hoge.

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Three additional states – New Mexico, Oregon, and Ohio – have passed legislation to update their conformity to the Internal Revenue Code (IRC) and deal with various provisions in the One Big Beautiful Bill Act (OB3) (P.L. 119-21).

New Mexico: In the Land of Enchantment, Governor Grisham signed into law a measure which decouples New Mexico, a rolling conformity state, from IRC section 168(k) (bonus depreciation), section 168(n) (depreciation of production property), and the OB3 changes to add back depreciation/amortization to adjusted taxable income in IRC section 163(j). The newly enacted legislation also repealed the subtraction modification for global intangible low taxed income (GILTI) included in taxable income. Relatedly, the bill also will allow taxpayers to include the factors of a controlled foreign corporation (CFC) in the New Mexico apportionment calculation to the extent the income of the CFC is included in net income. The changes in the measure are effective for tax years beginning on or after January 1, 2027. For more information on Senate Bill 151, please contact Nick Palmos.

Oregon: Both chambers of the Oregon Legislature recently approved a bill that, if signed, would change statutory references to global intangible low-taxed income (GILTI) to “net controlled foreign corporation tested income” (NCTI), per the change in OB3. Thus, the Oregon dividends received deduction would apply to NCTI amounts included in taxable income. Additionally, the bill would extend the state pass-through entity (PTE) elective entity-level tax regime for two additional tax years, through tax year 2027. PTEs electing into the Oregon PTE tax regime would be permitted to apply overpayments of PTE elective tax as estimated tax payments for the following year. The bill is currently awaiting a signature from Governor Kotek. Please contact Nisha Mathew and Robert Passmore with questions on Senate Bill 1510.

Ohio: Ohio Governor DeWine recently signed into law a bill updating the state’s general conformity to incorporate IRC changes taking effect after March 7, 2025, but before the effective date of the bill (March 5, 2026). In other words, Ohio will effectively conform to the provisions of OB3. While the bill is mostly applicable to the Ohio Personal Income Tax regime, the updated date of conformity affects any part of existing Ohio tax law which incorporates provisions of the IRC, including the Commercial Activity Tax to the extent its provisions refer to the IRC. Please contact Dave Perry and Brandon Erwine with questions on Senate Bill 9.

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In response to the federal phase-out of the penny, states are continuing to provide guidance for taxpayers on handling the application of sales tax to transactions that require rounding because of the inability to make exact change. We will continue to track these through TWIST, providing a list of the states as well as links to where you can find the direct guidance.

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