Summary: California and Virgina extended the sunset for their pass-through entity taxes in response to the SALT deduction changes made by the One Big Beautiful Bill (OBBB). Maine expands its sales tax base to include streaming platforms, and Louisiana updated its sales tax economic nexus rules to reflect the state’s recent legislation to tax digital products.

This article summarizes important state tax developments in California, Virginia, Maine, and Louisiana.

California and Virginia: Pass-Through Entity Tax Extension

When the federal $10,000 limitation for the state and local tax (SALT) deduction was introduced in 2018 as part of the Tax Cuts and Jobs Act (TCJA), states began enacting workarounds, known as pass-through entity taxes (PTET). Under TCJA, the SALT deduction limitation was set to expire beginning in 2026. While most states that enacted PTETs did not establish a specific sunset date (or aligned their sunset date with the expiration of the federal SALT deduction limitation), a few states set a fixed PTET sunset date of December 31, 2025.[1]

Under the One Big Beautiful Bill (OBBB), the SALT deduction limitation was made permanent, with the limitation increasing to $40,000 in 2025 and growing by 1% each year from 2026 through 2029 before finally reverting to $10,000 beginning in 2030. As a result, those states with fixed PTET sunset dates will need to enact new legislation to extend their PTETs if they want their residents to be able to benefit from this workaround. Recently, the states of California and Virginia enacted PTET sunset date extensions:

• California: Governor Gavin Newsom signed in law SB 132 on June 27, 2025, which extends the state’s PTET for five years through 2030.
• Virginia: On May 2, 2025, Governor Glenn Youngkin signed into law HB 1600, which extends the state’s PTET for an additional year through 2026.

Maine: Sales Tax on Digital Services

Currently, Maine taxes “products transferred electronically,” which means a “digital product transferred to the purchaser electronically the sale of which in nondigital physical form would be subject to tax . . . as a sale of tangible personal property.”[2] This includes items, such as digital books, music, videos, etc.

Effective January 1, 2026, pursuant to legislation (LD 210) signed into law by Governor Janet Mills on June 25, 2025, Maine’s sales tax base will expand to include digital audiovisual and digital audio services. That legislation added the following definitions:

• Digital audiovisual and digital audio services: The electronic transfer of digital audiovisual works and digital audio works to an end user with the right of less than permanent use granted by the seller, including when conditioned upon continued payment from the purchaser or a subscription.
• Digital audiovisual works: A series of related images that, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.
• Digital audio works: Works that result from the fixation of a series of musical, spoken or other sounds, including ringtones. For purposes of this subsection, “ringtones” means digitized sound files that are downloaded onto a device and that may be used to alert the purchaser with respect to a communication.

Based on these definitions, particularly the fact that an end use may receive “rights of less than permanent use” that are “conditioned upon continued payment from the purchaser or a subscription,” the state’s sales tax will now extend to streaming services/platforms, like Netflix, Hulu, and Spotify.

Louisiana: Sales Tax Economic Nexus Update

In January 2025, we reported on several changes to Louisiana tax laws, including the state’s decision to start taxing “digital products,” effective January 1, 2025. However, at that time, the state’s economic nexus statute did not include revenues from the sale of “digital products” in the calculation to determine if a seller without physical presence exceeded the state’s $100,000 revenue nexus threshold.

This  technicality was corrected under legislation (HB 578) signed in law by Governor Jeff Landry on June 20, 2025. The legislation now includes sales of “digital product” to the state’s economic nexus statute, and this change is effective retroactively to January 1, 2025.

[1]Those states include California, Illinois, Oregon, Utah, and Virginia.
[2]See Me. Rev. Stat. Ann. §§ 1752(9-E) and 1811(1).