Overview
The U.S. SALT landscape continues to evolve rapidly, with states expanding their tax bases, modifying economic nexus standards, and introducing new taxes and fees aimed at emerging digital business models.
For businesses operating across multiple states, these changes can have a direct impact on sales tax obligations, pricing, compliance processes, and historical tax exposure. Software and digital service providers, businesses collecting or selling personal data, advertising platforms, social media companies, and businesses with unpaid state tax liabilities should pay particular attention to the developments taking effect during 2026 and 2027.
The June 2026 developments covered in this update include:
- Alabama: Senate Bill 221 clarifies that qualifying credit card transaction fees are not taxable.
- Colorado: A new law expands the sales and use tax base to software available for repeated sale and license.
- Kentucky: House Bill 757 changes the economic nexus threshold and brings data brokering services within the sales and use tax framework.
- Utah: Senate Bill 162 expands sales tax to streaming, subscription-based digital services, and certain electronically delivered software.
- Illinois: Senate Bill 3019 introduces taxes and fees affecting targeted advertising, social media platforms, and certain digital asset businesses.
- Indiana: A 2026 tax amnesty program provides an opportunity to settle certain historical tax liabilities without penalties, interest, and collection fees.
- Missouri: Proposed reforms could gradually eliminate individual income tax while expanding the sales and use tax base.
I. Sales and Use Tax
Alabama – Senate Bill 221 clarifies that credit card processing fees are not taxable
Alabama has clarified the treatment of credit card transaction fees for sales and use tax purposes.
Under Senate Bill 221, a credit card transaction fee is a fee charged on purchases made by credit or debit card to offset interchange fees imposed on a merchant or seller. The legislation provides that qualifying fees charged in connection with an electronic payment transaction should be excluded from the seller’s gross sales for purposes of calculating sales and use tax.
This means qualifying credit card transaction fees will no longer form part of the Alabama sales and use tax base.
The change becomes effective September 1, 2026.
For Alabama sellers, the change is particularly relevant to the way transaction amounts are recorded and included in sales tax calculations. Businesses should review their invoicing and tax calculation processes to ensure qualifying fees are treated separately from taxable sales once the amendment takes effect.
Colorado – Expands sales and use tax base via new act
Colorado is expanding the sales and use tax treatment of software.
Currently, pre-written software delivered through physical media is subject to sales tax in Colorado, while SaaS and cloud-hosted software accessed remotely is not taxable because no tangible property is transferred.
Beginning January 1, 2027, HB 26-1223 changes this position by qualifying software that is available for repeated sale and license as tangible property. As a result, such software will become subject to Colorado sales and use tax.
The change can affect businesses offering off-the-shelf software and subscription software. The alert specifically identifies products such as Microsoft subscriptions and Adobe software as examples of software that will be subject to Colorado sales and use tax.
The applicable rate can range from 2.9% to 11%, depending on the local rates applicable to the transaction.
For software businesses, the upcoming effective date provides an opportunity to assess how their Colorado transactions are currently classified and prepare their systems for the new tax treatment.
Kentucky – House Bill 757 reshapes state’s sales tax landscape
Kentucky is making two significant changes to its sales tax framework.
First, the state is changing its economic nexus threshold. Previously, businesses could meet the threshold through either $100,000 in gross sales or 200 transactions. From August 1, 2026, the transaction count test will be eliminated, leaving the $100,000 gross receipts test as the applicable threshold.
This brings Kentucky in line with the recent trend of states moving away from transaction-count-based economic nexus tests.
Second, Kentucky is expanding its taxable base to include data brokering services. Data brokering is defined as the collection, aggregation, and analysis of personal data for sale to a third party. These services are now included under Kentucky Revised Statutes Section 139.010 as taxable sales and use tax transactions.
Businesses selling into Kentucky should therefore reassess both their economic nexus position and the taxability of data-related services before the August 2026 effective date.
Utah – Senate Bill 162 broadens the state’s sales and use tax reach
Utah is expanding the application of sales tax to a range of digital services.
Senate Bill 162 clarifies that streaming or subscription access to digital audio-visual works, digital audio works, digital books, and gaming services is subject to Utah sales tax. The treatment applies regardless of the delivery method or whether the amount paid provides a right to single-use access.
The legislation also brings certain electronically delivered prewritten computer software and seller-hosted prewritten computer software within the Utah sales and use tax framework.
The change is effective July 1, 2026.
For businesses operating digital subscription models, the amendment highlights the importance of reviewing the taxability of different digital products and services based on the customer’s location and the nature of the service being provided.
II. Other Updates
Illinois – Senate Bill 3019 eyes revenue from advertising and social media services
Illinois is introducing significant new taxes and fees targeting parts of the digital economy through Senate Bill 3019.
The legislation introduces three key measures:
- Targeted Advertising Services Tax
- Social Media Platform Fee
- Digital Asset Tax
The Targeted Advertising Services Tax applies at a rate of 10% of gross receipts for targeted advertising service providers deriving more than USD 1 million in receipts from Illinois customers during the previous 12-month period.
The Social Media Platform Fee applies where a platform has more than 100,000 Illinois users. The fee ranges from USD 0.10 to USD 0.50 per month per Illinois user, depending on the number of Illinois users.
The Digital Asset Tax applies to certain digital asset brokers with an in-state physical presence or Illinois-sourced receipts relating to digital asset transactions exceeding USD 100,000 during the previous 12-month period.
The measures are effective January 1, 2027.
For businesses operating digital advertising, social media, or digital asset platforms, the new rules warrant an early review of revenue sourcing, customer and user counts, and potential state tax exposure.
Indiana – The state offers amnesty to settle past liabilities without penalties
Indiana is providing taxpayers with an opportunity to address certain historical tax liabilities through its Tax Amnesty 2026 program.
The program applies to unpaid or underpaid Indiana tax liabilities relating to tax periods ending on or before January 1, 2024.
Taxpayers that participate can receive a waiver of associated penalties, interest, and collection fees, leaving the actual tax liability payable.
The amnesty period runs from July 15, 2026, through September 9, 2026.
Eligible taxpayers can apply through the Indiana Taxpayer Information Management Engine (INTIME), the state’s official online taxpayer portal, or contact United Collection Bureau to apply for the program.
For businesses with unresolved historical Indiana tax positions, the limited amnesty window makes it important to determine eligibility and quantify outstanding liabilities before the program closes.
Missouri – Explores reform through income tax repeal and sales tax expansion
Missouri is considering a broader restructuring of its state tax system.
In April 2026, the Missouri General Assembly approved resolutions proposing amendments that would gradually eliminate the state’s individual income tax while expanding the sales and use tax base.
Under the proposal, the individual income tax rate would decrease by 0.01% for a calendar year if net general revenue collections in the preceding fiscal year exceed the net general revenue collections for the fiscal year ending June 30, 2025, by at least USD 20 million.
To offset the resulting revenue reduction, the amendment would allow Missouri to expand the sales and use tax base, increase existing sales tax rates, and bring products and services that are currently not subject to tax within the sales tax framework.
The proposal was scheduled for submission to voters on the August 4, 2026 primary ballot, following approval by the Governor.
If approved, the changes could gradually shift the overall tax burden toward an expanded and increased sales tax on everyday purchases.
What These Developments Mean for Businesses
The June 2026 developments point to a broader shift in the U.S. state tax environment. States are continuing to revisit traditional sales tax concepts as business models become increasingly digital.
For businesses, the impact is not limited to changes in tax rates. The developments affect what is taxable, when nexus is established, which revenue counts toward a threshold, and whether new taxes or fees apply to digital activities.
Software and SaaS providers should pay particular attention to Colorado and Utah. Businesses operating digital advertising, social media, or digital asset platforms should evaluate their Illinois exposure. Companies selling into Kentucky should reassess their economic nexus calculations and determine whether their activities involve taxable data brokering services.
At the same time, businesses with historical Indiana tax liabilities may have a limited opportunity to resolve those liabilities under the state’s 2026 amnesty program.
The common thread across these developments is the need for businesses to keep their state tax positions under regular review. A tax treatment that was appropriate yesterday may not remain appropriate once a state changes its definition of taxable products, modifies its nexus threshold, or introduces a new tax on a digital business activity.
FAQs
What are the major U.S. state tax developments in June 2026?
Key developments include changes to sales and use tax in Alabama, Colorado, Kentucky, and Utah, new digital-focused taxes and fees in Illinois, a tax amnesty program in Indiana, and proposed income and sales tax reforms in Missouri.
When does Colorado begin taxing qualifying software?
The new Colorado treatment applies from January 1, 2027, when software available for repeated sale and license will qualify as tangible property for sales and use tax purposes.
What is changing in Kentucky’s economic nexus threshold?
From August 1, 2026, Kentucky will eliminate its 200-transaction test. The economic nexus threshold will be measured using the $100,000 gross receipts test.
Which digital services are affected by Utah Senate Bill 162?
The legislation covers streaming or subscription access to digital audio-visual works, digital audio works, digital books, and gaming services. It also addresses certain electronically delivered and seller-hosted prewritten computer software.
What does Indiana Tax Amnesty 2026 provide?
Eligible taxpayers can settle qualifying historical Indiana tax liabilities while receiving a waiver of associated penalties, interest, and collection fees. The program runs from July 15, 2026, to September 9, 2026.
What new taxes and fees are proposed in Illinois?
Senate Bill 3019 introduces a Targeted Advertising Services Tax, a Social Media Platform Fee, and a Digital Asset Tax. The measures are effective from January 1, 2027.
Conclusion
The June 2026 SALT developments demonstrate how quickly U.S. states are adapting their tax frameworks to changing business models and revenue requirements.
From Alabama’s clarification on credit card transaction fees to Colorado’s expansion of sales tax to qualifying software, Kentucky’s revised nexus threshold, and Utah’s taxation of digital subscriptions, businesses need to look beyond traditional sales tax rules.
Illinois’ new digital-focused taxes and fees, Indiana’s temporary amnesty opportunity, and Missouri’s proposed tax restructuring add further considerations for businesses with multi-state operations.
For businesses selling products or services across U.S. states, regular monitoring of state tax legislation and a timely review of nexus, taxability, sourcing, and compliance processes can help identify changes before they become compliance issues.
About M2K Advisors
M2K Advisors is an international tax advisory firm having offices in India, Singapore, USA & UAE. Our firm offers varied services in USA such as setting up companies in Delaware and other states in USA, tax advisory, tax return filing, state & local tax compliance, sales & use tax compliance, IRS audit representation, FBAR & FATCA filing. M2K Advisors is the specialist firm for businesses managing US tax obligations. Our focused expertise in M&A and cross border structuring, state & local nexus studies, and multi-state compliance makes us the most reliable partner for foreign entities and startups entering the USA market.
Disclaimer: This article is intended for general guidance only and should not be considered tax advice or an opinion. Businesses should consult the appropriate advisor regarding their specific facts and circumstances.
