Tax Fairness Under Pressure: COST’s 2024 SALT Update Reveals the Growing Complexity of State Tax Policy

In an increasingly aggressive and fragmented state tax landscape, the Council On State Taxation (COST) continues to advocate for sound, equitable, and administrable tax policies on behalf of multistate businesses. At the 2024 Arizona Tax Conference, Senior Tax Counsel Fred Nicely presented COST’s comprehensive update on national SALT issues, including property tax administration, business tax burdens, policy scorecards, and legislative and litigation developments.

The presentation provided a clear message: state tax systems are becoming more complex, more aggressive, and more likely to impose disproportionate burdens on business taxpayers. COST’s work in 2024 reflects a broad-based effort to push back against unbalanced proposals and promote reforms grounded in transparency, consistency, and fairness.

Property Tax Inequities Remain a Core Concern

Property taxes continue to be the largest single source of state and local revenue, and they make up the largest share of business taxes—around 35% nationally. Yet, business taxpayers often face significantly higher effective rates than homeowners. Data presented by COST, based on the Lincoln Institute of Land Policy’s 2022 study, shows that in many states, industrial and commercial property is taxed at rates 80% to 90% higher than residential property.

This disparity, COST argues, undermines economic competitiveness and violates principles of fairness. COST’s property tax policy position calls for:

• A uniform tax base and rates across property classes,

• Efficient and centralized administration,

• Fair appeal and payment processes, including the ability to dispute assessments without prepayment.

To promote reform, COST has published property tax scorecards in collaboration with the International Property Tax Institute (IPTI), ranking jurisdictions based on transparency, consistency, and procedural fairness. These scorecards serve as practical tools for identifying administrative gaps and advocating for best practices.

Businesses Continue to Shoulder a Large Share of the SALT Burden

COST’s FY22 study with Ernst & Young and STRI confirms that businesses paid over $1.07 trillion in state and local taxes—a 13.7% increase from FY21. Despite claims that businesses underpay taxes, the business share of total SALT revenue has remained remarkably steady—hovering around 44% for two decades.

In Arizona, for example, businesses paid $16.3 billion in taxes in FY22, accounting for 41.3% of all state and local tax collections. Property tax was the largest single contributor, followed by sales taxes on business inputs and corporate income taxes.

This data pushes back on policy narratives asserting that corporate income tax collections alone should define whether businesses pay their “fair share.” COST has consistently urged lawmakers to consider the full array of taxes paid by business—especially those that function as operating costs and are not linked to profit.

Ballot Measures and Legislative Watch: A Busy Year for SALT Activity

COST’s 2024 update tracked a surge of state-level ballot initiatives and legislative activity affecting property taxes, income taxes, and special assessments.

Highlights include:

• Oregon’s Measure 118, which would impose a 3% minimum tax on sales over $25 million to fund a per-person rebate program.

• California’s ACA 13, which would require any voter initiative seeking to raise the threshold for new taxes to meet that same threshold.

• Florida’s Amendment 5, indexing the homestead exemption to inflation.

• North Dakota’s initiative to eliminate property tax, which could radically shift the state’s tax mix.

COST flagged these developments as potentially destabilizing, especially those that disproportionately target business or introduce new layers of tax complexity.

Growing Concern Over Mandatory Worldwide Combined Reporting (WWCR)

One of COST’s most closely watched trends is the rise of proposals to implement WWCR—a tax base expansion that would require multinational companies to include foreign affiliate income in state tax filings.

Though no state currently mandates WWCR, bills introduced in Maryland, Minnesota, Tennessee, Vermont, and Nebraska have sparked concern. COST opposes these efforts on several grounds:

• Administrative burden: WWCR dramatically increases filing complexity.

• Policy misalignment: No other country imposes a similar regime.

• Ineffective targeting: WWCR fails to account for treaty protections, international standards, and the realities of global commerce.

In several cases, COST successfully testified against these bills. For example, in Nebraska, legislation to impose WWCR was removed from the final budget after strong opposition. In Vermont, a WWCR proposal was replaced with a decoupling from IRC §250 deductions for FDII and GILTI—still problematic, but less sweeping.

Apportionment Policy Shifts: The Rise of SSF and Market-Based Sourcing

States continue moving away from traditional three-factor formulas in favor of single sales factor (SSF) apportionment and market-based sourcing (MBS) for services. In 2023–2024:

• Montana, Massachusetts, and Tennessee enacted SSF laws.

• New Mexico and Oklahoma offered elective SSF treatment for certain industries.

• Alaska proposed adopting MTC model language to implement MBS and SSF.

COST warned that these changes can lead to significant distortions—especially when a one-time transaction or project inflates the sales factor in a particular state. The Vectren Infrastructure case in Michigan is a cautionary tale: a one-time gain triggered taxation of 70% of the income under SSF, despite the taxpayer’s limited and temporary activity in the state.

These developments raise important questions about fairness, apportionment integrity, and the availability of relief under UDITPA § 18. Unfortunately, as cases like Vectren show, courts are often unsympathetic to alternative apportionment requests.

P.L. 86-272: The Battle Over Internet Activity and Tax Nexus

COST remains a leading voice defending Public Law 86-272, which limits states’ ability to tax out-of-state businesses that only solicit sales of tangible goods. The MTC’s 2021 reinterpretation sought to deny P.L. 86-272 protection to companies with interactive websites—essentially nullifying the law for modern businesses.

Several states have adopted the revised guidance, including California, New York, Minnesota, and Oregon. In California, however, the guidance was struck down as an “underground regulation” in the American Catalog Mailers Association case. COST applauded the ruling, noting that changes of such magnitude should occur through formal rulemaking, not administrative guidance.

Litigation and Amicus Support: Defending Against Aggressive SALT Policies

COST supports its members through targeted litigation advocacy, typically at the appellate or supreme court level. In 2023–2024, the organization filed briefs in key cases involving:

• Sales and use tax exemptions (e.g., Walmart Starco in Missouri),

• Digital services taxation (e.g., Comptroller v. Comcast in Maryland),

• Apportionment disputes (e.g., MMN Infrastructure in Michigan),

• Property tax treatment of intangibles (e.g., OGP v. Los Angeles County).

These cases reflect an increasingly contentious legal environment, as states seek to push the boundaries of existing tax frameworks.

Other Key Developments: Digital Taxes, Delivery Fees, Class Actions, and Use Tax Litigation

COST also highlighted a range of emerging SALT issues:

• Digital advertising taxes remain active in Maryland, New York, and Nebraska.

• Retail delivery fees are gaining traction as a way to fund transportation infrastructure (e.g., Minnesota’s 50-cent fee on deliveries over $100).

• Consumer protection lawsuits challenging the improper collection of sales tax have raised questions about refund procedures and class action standing.

• Use tax valuation issues, such as those raised in South Dakota’s Ellingson case, demonstrate states’ aggressive use of use tax to reach out-of-state activity.

These developments illustrate the expanding reach of indirect taxes and the legal uncertainties that arise when traditional rules meet digital-age transactions.

Final Thoughts: A Call for Balanced Tax Policy

COST’s 2024 update underscores a simple truth: business taxpayers are facing an increasingly aggressive and complex SALT landscape. From apportionment to digital tax rules, from compliance procedures to ballot box populism, multistate businesses must remain vigilant.

COST continues to advocate for:

• Administrative transparency,

• Fair and equitable tax treatment,

• Limits on extraterritorial taxation, and

• A level playing field in disputes and audits.

With legislative and regulatory threats on the rise, the organization’s tools—policy statements, scorecards, litigation support, and grassroots advocacy—remain essential for navigating SALT in 2024 and beyond.

© 2025 Jeanette Moffa. All Rights Reserved.