SALTQuarterlyDec2024

Domestic tax quarterly
webcast series
A focus on state tax matters
December 4, 2024
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Page 2 │ Domestic tax quarterly webcast series: a focus on state tax matters
CPE eligibility
We will launch at least three polls per CPE

credit; participants must attend the full
session and participants must answer at
least three polls per CPE credit to receive
full credit.
Course description and learning objectives
Course description:
In this webcast, panelists will discuss how changing state policies can shift the characterization of what is
being sold for sales-and-use-tax purposes, as well as sales-and-use-tax audit trends and leading practices
around this critical determination. They will also describe the practical uses of artificial intelligence (AI) in
the state and local tax world, identify state and local tax policy trends from 2024 and provide an update on
the current state of the states.
Learning objectives:
1. Discuss the importance of knowing what you are selling for sales and use tax purposes
2. Describe practical uses of Generative AI (GenAI) in the world of state and local tax
3. Discuss the current state of the states
4. Describe key changes of Louisiana tax reform
5. Identify key state and local tax trends from 2024 and tax policy considerations going into 2025
Today’s moderator
Breen Schiller
Ernst & Young LLP
Chicago, IL
Agenda
01 Knowing what you are selling
02 Practical uses of GenAI
03 Louisiana tax reform
04 State tax policy trends and considerations
Today’s speakers
Natalie Haynes Mark Stefan Sara Gaudreau Jeremy McMullin

Ernst & Young LLP Ernst & Young LLP Ernst & Young LLP Ernst & Young LLP
St. Louis, MO San Jose, CA Irvine, CA New Orleans, LA
Today’s speakers
Julie Gallina Christopher Aiken Jennifer Green Scott Roberti

Ernst & Young LLP Ernst & Young LLP Ernst & Young LLP Ernst & Young LLP
Nashville, TN Cleveland, OH Miami, FL Stamford, CT
Polling question
A I strongly agree
Q We sell
straightforward B I somewhat agree
products and services
and have no
C I strongly disagree
challenges with taxing
authorities as to the
D Does not apply (EY, faculty, other)
categorization of our
revenue streams.
01 Knowing what you are selling
Trends to broaden the tax base
State trends targeting new sources of revenue
 States are continuing to reevaluate the application of their tax laws to emerging business models.
 States are expanding the tax base through:
 Legislation
 Administrative actions
 Application of positions through field audits
State approaches to taxation of emerging technology
Examples of legislative changes

 Washington enacted ESHB 2075 (2009), which taxes Digital Automated Services
(DAS).
 Maryland HB 732 enacted a Digital Advertising Gross Revenues Tax.
 Several states enacted Marketplace Facilitator statutes.
Examples of regulatory changes or changes in administrative guidance

 Texas proposed changes to Rule 3.330 addressing data processing services.
 Minnesota Tax Facts 177 explains that non-fungible tokens (NFTs) are subject to tax
when the underlying product (goods or services) is subject to tax.
 Wisconsin Tax Bulletin, Number 219 explains that the sale of an NFT may be taxable
if the underlying product, good or service is taxable.
State approaches to taxation of emerging technology
Examples of policy changes enforced through controversy

 California’s redefined participation rule of “genuine human interaction”
 Texas’ assertion of data processing against commissions of a marketplace facilitator
 New York’s application of constructive control of software to tax software as a service (SaaS)
 Wisconsin’s application of tax to SaaS as a telecommunications service
Why are these trends important?
 A state’s approach to the taxation of new business models in the past

may signal how it might attempt to treat companies or industries in
the future.
 Understanding the positions held by states prepares taxpayers for
proactive management of risk.
 Emerging technologies are complex, and tax authorities may not have
all the facts about products or service offerings (tax departments may
not either).
 Taxpayers are bound by systems limitations, i.e., billing systems, ERPs
and tax engine.*
• *Tax engine = sales tax software that makes taxability decisions to help determine which items are taxable and the applicable tax rates.
Knowing what you are selling
Historically, sales and use taxes have applied to sales of tangible personal property and
specifically enumerated services. States have been, and will continue to be, forced to address
the application of their laws to a broad range of digital goods and services such as:
 SaaS  Digital advertising

 Digital books, movies, etc.  Large language models (LLMs)
 NFTs  Marketplace seller fees
Additional considerations
 Businesses need to understand if they are  It is important to consider how the

consuming vs. reselling. classifications of your sales might differ
 Some agreements for infrastructure as a service (IaaS) by state.
do not allow for resale.  AI may be used in categorization.
 Business models change based on the market, and  What relief does the taxing jurisdiction
you will be required to identify and assess those provide to marketplace facilitators?
changes for the correct application of tax.
Polling question
A Sales of service
Q How do states
categorize the sales of B A license of software
LLMs for purposes of
sales and use taxes?
C Tangible personal property
D It depends
E Does not apply (EY, faculty, other)
Impacts of bundling
 Bundling typically refers to taxable and nontaxable products and

services sold for one lump-sum price.
 Understand how all the components in the transaction work together
 Bundling rules differ by state.
 Some states use a “true object” test.
 What is the right taxability product classification for your tax engine?
 Examples
 Recruiting service in Texas with use of digital platform/analytics
 Subscriptions to a bundle of products that include downloads and SaaS
 Alabama doesn’t tax SaaS but downloaded PDF files are considered taxable
tangible personal property.
 Ancestral/health reports and saliva kits in Colorado
 Multistate Tax Commission (MTC) group seeks uniform approach for
bundled digital goods - applying streamlined bundling rules to six
examples.
Texas proposed regulations
 On September 13, 2024, the Texas Comptroller of Public Accounts

(Comptroller) proposed changes to 34 Tex. Admin. Code Section 3.330, which
relates to the application of sales and use tax to data processing services.
 A public hearing on the proposed amendments is scheduled for December 6, 2024.
 The regulation is intended to “help online marketplaces understand their

responsibilities,” particularly regarding the provision of data processing
services by a marketplace facilitator to a marketplace seller.
 The proposed regulation represents a significant change in how the
Comptroller would determine what it considers taxable data processing.
 The Comptroller traditionally has relied on the “essence of the transaction” test to
determine if a service qualified as taxable data processing.
 The Comptroller now proposes to use an “ancillary test” focusing on what the seller
is doing and not on what the buyer intends to purchase.
 This policy shift in determining if a service is taxable data processing has the
potential to vastly expand the scope of what is taxable.
What do I do from here?
How to determine what you are selling and the proper classification
 Review the agreement between seller and purchaser
 Understand what is being sold/what rights are being transferred
 Understand the functionality of the product offering
 Determine if there are multiple components, and if so, understand how they work together
 Assess how the organization’s invoices describe its products and services
 Evaluate how the goods and services are being described in marketing materials
 Determine the correct sourcing for the transaction
 Review the state definitions and analyze the category into which the product/service falls
02 Practical uses of GenAI
Polling question
A Completely new to it
Q Which of these best
describes your B
Somewhat familiar – I know what it is but have limited
experience with and hands-on experience
understanding of AI?
C Significant knowledge and experience
D Does not apply (EY, faculty, other)
Which of these best describes your experience with and understanding of
AI?
Experience & understanding of AI in 2024

Participants are becoming
100% more familiar with AI, but
90% few have advanced to
80% significant use
70%
60%
50%
40%
30%
20%
10%
0%
Q1 Q2 Q3
Completely new to it Somewhat familiar Significant knowledge and experience
Source: Poll results from the first-, second- and third-quarter EY domestic tax quarterly webcast series
Do you believe GenAI will help drive increased effectiveness and efficiencies
within your tax function in the next three years?
2023 2024
I don’t know Why now?

Yes 1. Advances in LLMs
No
2% and neural networks
15% 11%
2. Increased computing
No
power and storage
3. Investment and
innovation
85% Yes
87%
Source: 2024 EY Tax and Finance Operations (TFO) Survey
What is your most significant barrier to using GenAI within your tax
function?
Resistance from teams in adopting
Not a leadership priority
new technology and processes
Lack of accessible, high- Respondents are
Quality concerns or
accuracy of results 5%
4% quality, and reliable data anticipating a
18%
6% broad range of
Insufficient budget challenges
8%
Data security and privacy

14%
Understanding of use 10%
cases and capabilities
10% 13%
Unclear return on Skilled talent to build, deploy,
investment (ROI) 12% maintain and govern
Regulatory compliance and legislation
Note: The question was asked to respondents who are in the non-existent or exploratory maturity phases with GenAI.
Source: 2024 EY TFO Survey
How does the tax professional change with AI?
1 2 3
Tax Tax Tax
professionals professionals professionals
AI copilots as supervisors
of AI agents
AI agentic workflows: illustration
Multiple AI agents operate and communicate in pods with a managing agent with oversight by humans to semi-autonomously perform
complex tasks across the business process
Supervising tax Supervising tax
Tax professionals
professionals professionals
 Humans in the loop
 Oversight controls
 Review and approve
Handoff Handoff
 Manages communication
 Manages platform application
programming interfaces (APIs)
 Tracks time and status
 Measures key performance
indicators (KPIs)
Managing agent  Learn from experiences
Data tasks Processing tasks Output tasks
Building block principles: multi-layer review controls
By combining curated digital “staff” and “managers,” a digital team can make use of low-cost and highly specialized LLMs for many
tasks, using the most complex and costly LLMs to review their work and provide feedback
Current Digital workforce (task-specific)

Leader Leader
100%
Director Director Director Director

Confidence
level
Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager
Human
Senior Senior Senior Senior Senior Senior Senior Senior Senior Senior Sophisticated LLM Agent(s)
Tax Domain Specific Agent(s)
Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff
Building Block Agent(s)
Less than 100%
Agent-infused business processes

The seamless integration of human-led and AI-led tasks can help achieve practical
digital teams with current technology, quality, and compliance paradigms
Human makes Agent services Human provides Agent prepares Agent provides first- Agent provides Human provides final
request request validation output level review second-level review review & approval
Standardized human-in-the-loop interaction with time tracking, ROI, and other KPIs captured throughout
AI factory: building AI agents at scale
Tax professionals’ input – AI factory – tax & tech Factory outputs – agents in
bring your tasks professionals build production
 Scale: Connects technology and the business

Business
requirements
Data
requirements
Learn and develop AI to systematically scale AI development and
skills usage
Baseline
Volumes operations
spend Use case definition and  Control: Centralized and standardized agent
prioritization creation in controlled environment
Supporting
Pain points
technology
 Business integration: Agents infused naturally
Service
Current Agent creation into existing operations
technology
levels
roadmap
 Upgrades & continuous improvement: Each
Agent prompt-tuning and
Outputs and Third-party year, agents receive version updates to
variations interaction testing
confirm they remain current and relevant with
changing tax or business requirements
Polling question
A Extract information from documents
Q Which of the following
tasks would you use AI B Triage mailbox
to help with?
C Review, summarize and draft documents
D Track and manage notices
Use case: digital teaming for invoice reviews
Opportunity
Automate the manual review process of sales-and-use-tax invoices using a team of agents to enhance accuracy and efficiency
GenAI impact
• Turnaround: What used to take days/weeks is now completed in minutes/hours
• Team size: What used to take up to 10-12 people over days is now handled by multiple automated agents supplemented by
human-in-the-loop review
From highly manual:

Open invoices, manually review and correct the raw data
Identify and Manually review
download Determine right Manually change data for errors
Reverse taxability if taxability based on
invoices Correct location the raw data across multiple
the tax is already the type of product
requiring review details levels
paid by the vendor purchased
To GenAI-enabled:
Extract Generate Manager agent Human-in-the-loop review
Client invoices Communicates with all Able to approve/decline
GenAI specialized agents perform the following tasks:
are identified specialized agents to changes suggested by AI,
1. Correct location details based on the invoice
by an automate the end-to- facilitating continuous
2. Determine the right taxability based on the type of product/software
automated end invoice review learning and improvement
purchased
agent. process.
3. Reverse taxability if the tax is already paid by the vendor
Tax workforce of the future: A partnership
Work reimagined between humans and AI
Augmented workforce:
Future tax departments will integrate AI agents Tax departments are evolving to leverage AI for
alongside human employees for enhanced routine, repetitive tasks, freeing up human
accuracy and efficiency. professionals for more strategic functions. This shift
What if the tax requires a new hiring mindset, focusing on individuals
Innovative hiring approaches:
Recruit professionals with skills in AI department workforce who can think creatively, adapt to AI-driven workflows,
and continuously innovate.
integration, data analytics, and strategic
thinking to collaborate effectively with
of the future blended During this transition:
intelligent systems human expertise and  Humans and AI agents will work side-by-side in an
Continuous learning: AI agents to redefine iterative learning process, improving efficiency and
accuracy over time.
Implement training programs focused on AI
collaboration and developing forward-thinking
efficiency and
mindsets to adapt to evolving technology innovation?  Successful teams will require a blend of technical
skills and soft skills, such as critical thinking and
adaptability.
50% Action: Build a workforce that thrives on

innovation.
of knowledge workers will
use a virtual assistant on a  Hire for the future: Seek out tech-savvy talent with
daily basis by 2025, up a passion for change
from 2% in 2019  Upskill continuously: Empower existing teams to
work effectively with AI agents
 Think differently: Encourage creativity and
adaptability in a world where AI reshapes
Source: Gartner traditional roles
Page 31 | Domestic tax quarterly webcast series: a focus on state tax matters
│
Wrap up: what’s next?
Now Beyond
Technology powered
People executing
by data executing
processes presented
processes managed
with data powered by
by people governing
technology
Next workflows
Identify, unify and
manage data –
experiment with
process and
technology while
teaching and enabling
people
03 Louisiana tax reform
Louisiana tax reform: corporate income and franchise tax
 HB 3 (sent to the governor on November 25, 2024) would repeal the franchise tax for tax periods
beginning on or after January 1, 2026.
 HB 2 (sent to the governor on November 25, 2024), effective for tax periods beginning on or after
January 1, 2025, unless otherwise noted, would:
 Reduce the corporate income tax rate to a flat 5.5% (from top 7.5% rate)
 Create a $20,000 standard business deduction
 Adopt permanent full expensing under IRC Section 168(k) and (e)(6) and Section 174 research and
experimental expenditures
 Repeal the inventory tax credit for C corporations effective for tax periods beginning on or after July 1, 2026
 Repeal refundability of the inventory tax credit for tax periods beginning on or after January 1, 2025
 Carry forward unused inventory tax credit for an additional five years
 Eliminate preferential apportionment treatment for companies with sales and inventory in foreign trade zones
 Accelerate the sunset of, or immediately eliminate, numerous corporate income tax credits, including:
 Angel investor  Low-income housing  LA quality jobs program  Retention & Modernization Act
 New markets  Enterprise zone program  Certain jobs tax credits investment credits
 Solar energy  Brownfields investor tax credit  LA Community Development Financial Institution Act credits
The following tax credits would have been repealed under the original proposal but were retained in the final bill:
 Motion picture tax credit*  Research and development tax credit*
 Historic rehabilitation tax credit*  Digital media tax credit
Page 34 │ Domestic tax quarterly webcast series: a focus on state tax matters * Annual cap created or lowered
Louisiana tax reform: sales and use tax
 HB 10 and HB 8 (sent to the governor on November 25, 2024) would:

 Extend and increase the .45% “clean penny” sales tax to a full 1% from January 1, 2025, through
December 31, 2029
 Lower the additional rate to .75% (from 1%) beginning on January 1, 2030
 Reduce vendor compensation from $1,500 to $750 per month
 Eliminate over 80 current sales tax exclusions, exemptions, rebates and credits
 Recodify and amend definitions of various taxable services
 Impose sales tax on digital products and services, with certain exclusions from the definition of
digital product and a business-to-business exemption
 Amend sourcing provisions for leased tangible personal property and digital products for purposes
of the tax imposed by parishes
 Authorize, but not require, parishes to match certain state tax exemptions
 Require parishes to include on their sales tax returns separate line items for sales of prescription
drugs and manufacturing, machinery and equipment
Louisiana tax reform: other tax
 Individual income tax

 HB 10 (sent to the governor on November 25, 2024) would:
 Decrease the individual income tax rate to 3% flat rate
 Increase the standard deduction
 Adopt full expensing under IRC Section 168(k) and (e)(6) and Section 174
 Repeal many business tax credits and retain other specified credits
 Repeal the capital gains exclusion
 Retain the inventory tax credit in current form for individuals and pass-through entities
 Severance tax
 HB 25 (sent to the governor on November 25, 2024) would:
 Amend definitions regarding orphan well qualification
 Final bill did not include proposed rate amendments
 Constitutional tax provisions
 HB 7 (filed with the Secretary of State on November 25, 2024) would amend the State’s Constitution by:
 Transitioning various property tax provisions, including the Industrial Tax Exemption Program, from the Constitution to
statute
 Requiring a two-thirds vote of the legislature to enact an exemption, exclusion, deduction, credit, or rebate or an increase
in the amount of a deduction, credit, or rebate for any tax
 Authorizing payments to parishes that elect to provide exemptions to their inventory taxes
04 State tax policy trends and
considerations
Polling question
A Increased revenue year over year
Q Where do you
anticipate state fiscal
conditions will be in B Decreased revenue year over year
2025?
C Flat revenue year over year
D Other
2024 state and local tax legislative scorecard: select developments
Tax rates Decrease corporate income: AR, CO (temporary), GA, ID, UT

Decrease individual income: AR, CO (temporary), GA, ID, SC (accelerates previously enacted cut), UT, WV
Increase corporate income: NJ (temporary surtax); Increase sales and use: Los Angeles (voter approved), Denver (voter approved), DC
Net operating Limit: CA, IL
losses (NOLs) Increase carryforward period: CT, RI; Other NOL: KS (individual only), MN (decoupling from federal 80% limitation), PA (increase NOL cap)
IRC conformity Conformity date: AZ, FL, GA, HI, ID, KY, ME, MA (individual only), NC, OR, SC, SD, VT, WV
Modifications: KS (IRC Sections 163(j) and 280C, employee retention credit); NE (R&E expenditures, depreciable property)
Income tax Combined reporting/consolidated returns: CO, NM; Deferred tax deductions: CT, KY; Foreign income: NM;
other Apportionment/sourcing: CA, CO (adopts Finnigan), DC (adopts Finnigan), IL, RI (for certain banking institutions); Deductions for certain grant money: GA, MO;
Pass-through entity tax: AL, HI, IN, KS, MO, NC, OK, RI; Other: CA (limit use of credits); GA (limit tax carryforward period for certain credits), IL (franchise tax
exemption increased), NH (automatic refunds of business taxes), PA (related-party add-back, bank and trust company shares tax), TN (franchise tax calculation)
Sales-and-use- Agricultural: AL, GA, ID; Certain food: IL (state only), KS, OK; Green/solar: NJ (phase out of elective vehicle exemption), NM, WI;
tax exemptions Machinery and equipment: LA, MD, MS, MO, OK, WI; Medical: AL, HI, LA; Technology: KS, KY, LA, PA, TN; Other: GA (sunsets various exemptions), IL (aircraft
materials and parts), IA (certain vehicles leased/ rented between affiliates), NJ (bullion), NY (sales among financial institution, vending machine sales), PA (waste
grease removal), WI (bullion)
Sales and use Accommodations: AL, CO, HI, IL, UT; Leases: IL, ME; Remote sales: IN, IL, NC, WY; Tax holiday: FL, NJ (partial repeal), VA; Tax base: CO, ID, KS, VT
tax other Local tax: CA (report rebated SUT revenue), CO (local tax administration, Home rule tax collection limit), LA (nongaming incentives)
Other: AZ (providers of sourcing services), CA (bad debt), IL (vendor discount, direct permit holders, 911 surcharge), WY (vendor credit)
Credits and Affordable Housing: AL, MA, NH, NJ, NY; Film: CO, IL, NJ, RI; Green/energy: AK, CO, IL, MS, NM, OR, PA, UT; Investment: AL, CA, CO, IL, IA, NJ, NM, PA, RI,
incentives UT; Jobs: AL, CO, CT, FL, IL, IA, KS, MA, NE, NY, OR, PA, RI, SC; Other: CO (conservation easement), NJ (historic property, brownfields, AI) , PA (historic
preservation), RI (historic preservation), SC (abandoned building), VT (machinery and equipment), VA (zones), WA (semiconductor manufacturing)
Controversy Administrative: CA (legal rulings, communications), CO (multi-state filing systems for insurance tax filings), KY (form/administrative writings), MD (electronic
filing); Amnesty: KY (vetoed), MA; Audits/appeals: AZ, CO (hold harmless provisions for certain vendors), GA, NY; Filing extensions: GA, NC; Tax-related study
commission: CT, HI, IL, ME, TN; Other: CO (penalties), ID (interest accrual), IL (payment processors), NY (tax shelter), UT (interest accrual)
Other Property appeals: IL, KS; Property assessment/value: AL, CO, DC, FL, KS, LA, UT, VT, VA, WV; Property classification: ME, VA, WY; Property tax exemptions:
CO, DE, GA, IL, KS, ME, OR, WI; Fuel-related taxes: AK, FL, IL, PA, SD, VT
Other taxes: CA (Medi-Cal tax), CT (insurance premiums tax), DE (hospitals net patient tax), LA (orphan wells), ME (hospital tax), OK (heavy equipment), SD
(autonomous vehicles), UT (radioactive waste), VT (short-term rental), WA (business and occupation tax exemptions), WV (tax on hospitals)
Source: Ernst & Young LLP analysis of state laws and administrative guidance as of December 3, 2024
Page 39 │ Domestic tax quarterly webcast series: a focus on state tax matter
Highlights from 2024
 State responses to declining revenues  Sales tax base expansion (e.g., digital, services)
 Rate increases, surtaxes and fees  Marketplace facilitators
 Limitations on exemptions, deductions, vendor  New York State corporate tax reform regs
compensation and use of credits (technically adopted December 27, 2023)
 Continuing state tax relief  San Francisco business tax reform (voter-approved
 Reduced individual and corporate income tax rates ballot measure)
 Targeted tax incentives (e.g., affordable housing,  Oregon voters resounding rejection of Measure
childcare)
118, which would have imposed a new 3%
 Special legislative sessions on tax reform (LA, NE) alternative minimum tax on certain corporations
 U.S. Supreme Court rulings in Moore v. United  Challenges to state’s adoption of MTC’s statement
States and Loper Bright Enterprises v. Raimondo on PL 86-272 protected and unprotected activities,
 Foreign income (e.g., 80-20 companies (NM), which was revised to include certain internet
income inclusion, global intangible low-taxed activities
income, foreign-derived intangible income, IRC  California’s adoption via a TAM invalidated
Section 965, worldwide combined reporting)  New York’s adoption via a regulation being challenged
State legislative sessions: 2025 timing and carryover
Will convene in 2025 Will convene in 2025 with

without carryover 2024 carryover State policy timeline
WA  Planning and strategy
ME
MT ND  July ’24—January ’25
OR MN VT
NH
ID
WY
SD WI
MI
NY M
CTA RI  In-session education
PA
NV NE IA  January ’25—June ’25
IL IN OH NJ
UT
CA CO
KS MO KY
WV VA
 Post-session analysis
DE
NC
AZ OK
TN  June ’25—July ’25
NM AR SC MD
MS AL GA
AK
TX LA
HI
FL
 All states will be in session, with most state legislatures

scheduled to adjourn by July 1, 2025.
 Most budget and tax legislative activity occurs during the
first two calendar quarters. Examples:
 NY fiscal year-end is March 31, and budget is typically
finalized and passed in March
 MN and IL fiscal year-ends are June 30, and budget is
typically finalized and passed by May
 CA fiscal year-end is June 30, and budget is typically
finalized and passed mid-June Source: EY research
* Bill carryover from 2024
Polling question
A Local taxes
Q Which topic do you
want covered on a B Property/real estate transfer tax issues
2025 quarterly
webcast?
C Audit trends
D Q&A with state revenue departments
2025 policy expectations
Foreign income treatment: worldwide combination, dividends-received

deductions, 80-20, transfer pricing
Drivers for 2025 Apportionment: sales factor, look through, industry-specific provisions,
litigation, MTC
 Fiscal conditions and Sales tax base expansion: services, and business-to-business, digital
budget requirements products, MTC and National Conference of State Legislatures
 Federal tax reform

Digital advertising and data excise taxes
 Legislative calendar
Tax expenditures: exemption and credit review and limitation
Proposed regulations (CA – sourcing; San Francisco – sourcing, MA – software,

NYC – corporate income tax reform, Texas – data processing)
One-minute recap
Page │ quarterly webcast series: a focus on state tax matters

44 tax
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SALTQuarterlyDec2024

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Domestic tax quarterly

We will launch at least three polls per CPE

02 Practical uses of GenAI

03 Louisiana tax reform

04 State tax policy trends and considerations

Natalie Haynes Mark Stefan Sara Gaudreau Jeremy McMullin

Julie Gallina Christopher Aiken Jennifer Green Scott Roberti

State trends targeting new sources of revenue

Examples of legislative changes

Examples of regulatory changes or changes in administrative guidance

Examples of policy changes enforced through controversy

 A state’s approach to the taxation of new business models in the past

 SaaS  Digital advertising

 Businesses need to understand if they are  It is important to consider how the

E Does not apply (EY, faculty, other)

 Bundling typically refers to taxable and nontaxable products and

 On September 13, 2024, the Texas Comptroller of Public Accounts

 The regulation is intended to “help online marketplaces understand their

D Does not apply (EY, faculty, other)

Experience & understanding of AI in 2024

Completely new to it Somewhat familiar Significant knowledge and experience

I don’t know Why now?

Source: 2024 EY Tax and Finance Operations (TFO) Survey

Data security and privacy

Regulatory compliance and legislation

Source: 2024 EY TFO Survey

Data tasks Processing tasks Output tasks

Current Digital workforce (task-specific)

Director Director Director Director

Tax Domain Specific Agent(s)

Agent-infused business processes

 Scale: Connects technology and the business

D Track and manage notices

E Does not apply (EY, faculty, other)

From highly manual:

50% Action: Build a workforce that thrives on

 HB 10 and HB 8 (sent to the governor on November 25, 2024) would:

 Individual income tax

E Does not apply (EY, faculty, other)

Tax rates Decrease corporate income: AR, CO (temporary), GA, ID, UT

Will convene in 2025 Will convene in 2025 with

 All states will be in session, with most state legislatures

D Q&A with state revenue departments

E Does not apply (EY, faculty, other)

Foreign income treatment: worldwide combination, dividends-received

 Federal tax reform

Tax expenditures: exemption and credit review and limitation

Proposed regulations (CA – sourcing; San Francisco – sourcing, MA – software,

Page │ quarterly webcast series: a focus on state tax matters

EY teams work across a full spectrum of ED None

All in to shape the future with confidence.

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