The 2025 state and local tax landscape brought significant developments across several areas of taxation. From apportionment reforms and expanded sales tax bases to court decisions reshaping property tax assessments and procedural rights, taxpayers faced a year of change. This GT Advisory summarizes some of the most impactful SALT developments of the year, which we highlighted in our podcasts and written content throughout 2025.
Income Tax Updates
California SB 132: Single Sales Factor for Banks and Financial Institutions
Effective for tax years beginning on or after Jan. 1, 2025, California SB 132 eliminated the three-factor apportionment method for banks and financial institutions. Previously, these entities could use an equal-weighted property, payroll, and sales formula if more than 50% of gross business receipts came from qualified business activities. Under SB 132, all financial institutions must now use the single sales factor formula, aligning them with California’s broader market-based apportionment regime. For more information on SB 132, see our prior GT Alert here.
California Market-Based Sourcing Regulation Amendments
The California Franchise Tax Board continued its rulemaking process for Proposed Regulation Section 25136-2, issuing a Second Notice of Modifications in May 2025. The amendments clarified four presumptions for sourcing service revenue to California—relating to real property, tangible personal property, intangible property, and the physical presence of individuals—and confirmed these presumptions may be rebutted by a preponderance of evidence. To read more about Proposed Regulation Section 25136-2, see our prior GT Alert here.
Sales and Use Tax Developments
Florida Repeals Commercial Lease Sales Tax
Florida HB 7031 eliminated the state’s sales tax on commercial real property leases, effective Oct. 1, 2025. This ended both the state-level tax (previously 2%) and local option taxes (typically 1% to 1.5% ), representing meaningful relief for commercial tenants. For more on how the new regulation impacts tenants, see our prior GT Alert here.
Florida Implements Data Center Exemption Changes
Also through HB 7031, Florida terminated its sales tax exemption for data centers effective Aug. 1, 2025. This change impacted some existing facilities, ongoing construction projects, and their contractors. To dive deeper into the exemption, visit our prior GT Alert here.
Washington Sales Tax Base Expansion
Washington SB 5814, signed in May 2025, significantly expanded the state sales tax base to include numerous personal, business, and professional services, including digital advertising services, IT support, landscaping, software training, website development, graphic design, and temporary staffing services. To read more about what the law entails, read our prior GT Alert here.
New York Information Services Tax
In Dynamic Logic v. Tax Tribunal, New York’s highest court held that personalized analysis of advertising campaigns was taxable, even where the underlying data was aggregated, anonymized, and used to create industry benchmarks. The court rejected the “personal or individual in nature” exclusion, emphasizing that accumulated data incorporated into databases marketed to other clients rendered the services taxable. To learn more about the ruling, see our prior GT Alert here.
Property Tax Developments
California Supreme Court: Olympic & Georgia Partners
In August 2025, the California Supreme Court issued Olympic & Georgia Partners, LLC v. County of Los Angeles, a decision concerning intangible assets in property tax assessments. The Court held that a city occupancy tax subsidy and “key money” payments could be included in the hotel property’s assessed value because these revenue streams derived from assets enabling the property itself—rather than the business enterprise—to generate additional revenue. To explore the ruling in greater detail, read our prior GT Alert here.
California Fire Relief
Following the devastating Palisades, Eaton, and other fires in January 2025, multiple property tax relief mechanisms became available to affected property owners. Read more about the property tax relief in our GT Alert here.
Texas Property Tax Exemption Constitutional Amendments
Texas voters approved 17 constitutional amendments in November 2025, including Proposition 9, which increased the inventory and equipment tax exemption from $2,500 to $125,000, and Propositions 11 and 13, which increased homestead exemptions. For further information on these 17 propositions, see our prior GT Alert here.
Other Notable Developments
California Attorney General Opinion on OTA Authority
In July 2025, the California Attorney General confirmed in Opinion No. 23-701 that the Office of Tax Appeals (OTA) may decline to apply a tax regulation if it conflicts with governing state statutes. While OTA must afford appropriate deference to the issuing agency, the opinion confirms OTA is not merely a rubber stamp when agency rules are at odds with statutory law. For more background and context on this opinion, read our prior GT Alert here.
Oregon’s Associational Standing
Oregon HB 2119, signed in May 2025, grants membership organizations statutory standing to seek declaratory relief on their members’ behalf in the Oregon Tax Court, codifying the federal three-prong Hunt test. This change may help taxpayers share litigation burdens and speed resolution of tax questions. To learn more about the law and its impact, see our prior GT Alert here.
Federal “No Tax on Tips” Legislation
The House Ways and Means Committee approved provisions allowing eligible employees to deduct “qualified tips” from taxable income for 2025 through 2028. While structured as an employee deduction, states would need to decide whether to conform or decouple, creating potential compliance challenges. Nearly a dozen states introduced their own no-tax-on-tips bills in 2025. For an in-depth look at the provisions, read our prior GT Alert here.
Texas R&D Credit Extension
Texas SB 2206, signed in June 2025, extended the Research and Development Credit beyond its Dec. 31, 2026, expiration. The legislation repealed the sales tax exemption portion (requiring use of the franchise tax credit only), aligned it more closely with the federal R&D credit, and increased allowable research expenditures from 5% to 8.722% for franchise tax credit purposes. For more details on the extension, see our prior GT Alert here.
Illinois General and Franchise Tax Amnesty Programs
The Illinois Department of Revenue began offering limited-time amnesty programs for general and franchise taxes in fall 2025, allowing eligible taxpayers to pay outstanding liabilities for specified periods and receive full waivers of penalties and interest; companies were urged to review their Illinois tax exposure ahead of the October filing start. The general amnesty covered most state taxes (excluding motor fuel) for periods after June 30, 2018, and before July 1, 2024, while the franchise tax amnesty covered liabilities after June 30, 2019, and before July 1, 2025, with both programs excluding taxpayers involved in certain investigations or litigation. We may see strong participation in the program, and an additional amnesty for remote retailers is scheduled for fall 2026. Read more in our prior GT alert here.
Looking Ahead
As we move into 2026, taxpayers may wish to monitor the status of state conformity decisions, continued developments in digital services taxation, additional tax credits and incentives, and property tax developments.