State Tax Updates May 8 2026: California, Maryland, NY, MA, Nevada
Multistate tax developments don’t move on a weekly cadence — but this past week was an exception. Deloitte’s State Tax Matters Issue 2026-18 (May 8, 2026) captures five consequential state tax updates may 8 covering remote-worker apportionment, OBBBA conformity, P.L. 86-272 challenges, sales-tax rounding mechanics, and transfer-tax anti-abuse rules. Each affects different taxpayer profiles — but together they signal where state tax controversy is heading in 2026.
At SW Accounting & Consulting Corp, we work with multistate businesses, remote-work employers, and pass-through entity owners who navigate exactly these issues. Below: each item with the practical takeaway and what to verify against your own filings.
California: Nonresident remote worker not a “unitary business” 🌴
A California Court of Appeal reversed summary judgment for the FTB, holding that a Texas-based radiologist working as an independent contractor for a single corporation does not operate a “unitary business” — even though the corporation served clients in California and elsewhere.
Case: A172054, Cal. Ct. App. (5/1/26). The taxpayer was a radiologist analyzing imaging studies remotely from Texas for a third-party corporation that collected studies from California and other states. The FTB asserted the radiologist’s activity was a unitary business apportionable under Cal. Code Regs. tit. 18, § 17951-4(c).
The court rejected this, holding that:
- The “unitary business” concept generally requires two or more entities commonly owned and integrated.
- A single sole proprietor engaging in one business activity with one corporation does not fit the unitary business test — even when the customer’s clients span multiple states.
- The California Supreme Court has never applied unitary theory to facts like these.
The court remanded “for further proceedings” and explicitly stated no opinion as to whether the FTB may tax the nonresident under a different legal theory. The win is on the unitary business theory; the FTB may try other avenues (e.g., source-of-income rules tied to the customer’s location).
Maryland: BRFA of 2026 — OBBBA decoupling and PTET changes 🏛
Maryland’s Budget Reconciliation and Financing Act of 2026 (S.B. 284, signed 4/8/26) selectively decouples from OBBBA bonus depreciation, partially conforms to OBBBA R&D and interest expense changes, and refines Maryland’s PTET regime.
| Provision | Maryland Treatment (TY2026+) |
|---|---|
| OBBBA special depreciation for qualified production property | Permanently DECOUPLED |
| OBBBA enhanced bonus depreciation (manufacturing entities) | Partial decoupling — limited to 20% of adjusted basis |
| OBBBA domestic R&D expensing reinstatement | Automatic conformity |
| OBBBA business interest expense limitation enhancement | Automatic conformity |
| BRFA 2025 multistate PTET resident-share modification | Delayed by 1 year + opt-out election allowed |
Maryland businesses with significant manufacturing depreciation should run both Maryland and federal computations side-by-side for TY2026 — the partial decoupling creates additional Maryland-only adjustments.
New York: Article 9-A P.L. 86-272 internet activity rule survives 🌐
The New York Appellate Division (Third Department) affirmed that the Department of Taxation’s Article 9-A regulation (20 NYCRR § 1-2.10) addressing P.L. 86-272 immunity for internet-based business activity is NOT preempted by federal statute.
Case: CV-25-0865 (5/7/26). An industry trade association representing remote sellers challenged the Rule, arguing it improperly narrowed P.L. 86-272 immunity. The court held:
- The Rule “reasonably immunizes” foreign corporations from franchise tax when in-state activities are solicitation, ancillary, or de minimis.
- It withholds immunity when in-state activities exceed those bounds.
- Whether specific internet-based functions are “ancillary or de minimis” is a question for as-applied challenges, not facial preemption.
- The plaintiffs failed to show the Rule “as written” obstructs P.L. 86-272’s purposes.
The pattern is widening — California, New York, and a growing list of states have been narrowing P.L. 86-272 protection in the digital age. Remote sellers with cookies, online customer service chat, in-app order tracking, or recurring subscription analytics may exceed solicitation. Run a P.L. 86-272 audit against your own digital footprint state-by-state.
Massachusetts: Penny shortage rounding for sales tax 💰
Massachusetts Directive 26-1 confirms that vendors must calculate sales tax to the exact cent regardless of payment method, and remit based on pre-rounding totals — even if cash payments round to the nearest nickel.
Practical mechanics:
- Calculate sales tax on the exact cent sales price.
- Show the exact tax amount on the receipt/invoice.
- Remit the exact amount to the DOR — before any cash rounding.
- Subsequent rounding to the nickel for cash payment doesn’t change the tax remittance.
For POS systems serving Massachusetts retailers, this is a configuration check. The penny-out, round-cash trend will affect every state with a sales tax in coming months.
Nevada: Transfer tax exemption affidavit proposed 🏠
Nevada’s Tax Commission (LCB File No. R084-26P, 5/1/26) proposed a rule requiring transfer tax exemption claimants to file an affidavit attesting that the transfer is not motivated by tax avoidance.
For Nevada real property transactions involving common ownership transfers (entity-to-entity, beneficial-interest transfers, business reorganizations), the proposed affidavit creates an additional documentation burden — and a perjury risk for false attestations. If you’re planning a Nevada real property transfer with a tax-exempt structure, monitor finalization of this rule and bake the attestation requirement into your closing checklist.
What should multistate tax teams do this week? ✅
- Remote contractor / nonresident sourcing audit. If you have CA-related receipts from out-of-state contractors, document why activity does (or does not) constitute a unitary business in light of the CA Court of Appeal ruling.
- Maryland depreciation modeling. For TY2026, run Maryland tax under both pre- and post-BRFA-2026 rules. Confirm where decoupling creates Maryland-only adjustments.
- P.L. 86-272 digital footprint review. Inventory in-state internet-driven activities (cookies, customer service, subscription telemetry). Document the position that they are solicitation/ancillary/de minimis — or quantify the franchise tax exposure if they aren’t.
- Massachusetts POS reconfiguration. Sales tax must remain pre-rounding. Audit your vendor systems before the penny shortage arrives.
- Nevada transfer-tax exemption checklist. Add affidavit requirement to your transfer-tax claim workflow once the rule is finalized.
Frequently Asked Questions 🗂
For Deloitte State Tax Matters Issue 2026-18, see taxathand.com. CA Court of Appeal opinions are at courts.ca.gov. NY Appellate Division decisions are on the NY State Courts portal.
Need help with multistate apportionment, OBBBA conformity analysis, P.L. 86-272 review, or transfer-tax structuring? SW Accounting & Consulting Corp’s state and local tax team supports businesses across all 50 states — book a consultation.
