State Tax Changes in 2026: Income, Sales, and Nexus Updates

State tax codes changed in dozens of ways on January 1, 2026 — and several more changes arrive later this year. Nine states cut individual income tax rates, three states trimmed corporate rates, digital services became taxable in more states, and Illinois simplified its economic nexus rules for remote sellers.

This guide summarizes the changes that matter most for residents, remote workers, and online shoppers.

Nine States Cut Income Tax Rates

The biggest theme of 2026 is income tax reduction. The following states lowered individual income tax rates effective January 1, 2026:

| State | 2025 top rate | 2026 rate |

|---|---|---|

| Georgia | 5.19% | 5.09% |

| Indiana | 3.00% | 2.95% |

| Kentucky | 4.00% | 3.50% |

| Mississippi | 4.40% | 4.00% |

| Montana | 5.90% | 5.65% |

| Nebraska | 5.20% | 4.55% |

| North Carolina | 4.25% | 3.99% |

| Ohio | 3.125% | 2.75% (flat) |

| Oklahoma | 4.75% | 4.50% |

Ohio went further than a rate cut — it converted its income tax to a flat 2.75% on nonbusiness income above $26,050 while tightening credits for higher earners. Oklahoma collapsed six brackets into three. Montana expanded its earned income tax credit, and New York expanded its child tax credit. Washington introduced a graduated capital gains tax with a top rate of 9% on gains above $1 million.

The nine states with no income tax at all — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — remain the most attractive for high earners deciding where to live or register a business.

Corporate and Business Tax Changes

• North Carolina cut its corporate rate from 2.25% to 2.00%.
• Nebraska lowered its corporate rate from 5.20% to 4.55%.
• Pennsylvania reduced its corporate rate from 7.99% to 7.49%.
• Louisiana officially phased out its capital stock (franchise) tax.
• Delaware decoupled from federal bonus depreciation for S corporations and partnerships.

Sales Tax: Digital Services Expand

No state raised its base statewide sales tax rate in 2026, but the taxable base grew:

• Maine began taxing digital audio and audiovisual services (streaming, subscriptions) on January 1.
• Ohio removed several long-standing exemptions for telecommunications, digital publishing, and advertising materials.
• Arkansas exempted groceries from the state sales tax — a welcome cut for consumers.
• Texas expanded sales tax to more data-processing services.
• Washington widened its retail sales tax to cover many business, personal, and professional services.
• Combined average sales tax rates hit a 10-year high near 10.2% as local governments raised rates in the first half of 2026.

For shoppers, this means a subscription or digital purchase may now carry sales tax where it was free before. Use the Sales Tax Calculator to check any state's combined rate before a big purchase.

Economic Nexus Simplified

Illinois eliminated its 200-transaction threshold on January 1, 2026, aligning with Alaska, Utah, and North Carolina: remote sellers now register based on revenue alone — $100,000 in gross receipts — instead of transaction counts. Most states use a $100,000 revenue-only threshold; New York and California still require $500,000 (New York also keeps a 100-transaction test). Low-volume, high-ticket sellers may now owe sales tax in states where they previously fell below the radar.

What These Changes Mean for You

• Remote workers: a state income tax cut directly raises take-home pay in the nine states listed above; see the State Tax Burden Calculator to compare total burden before relocating.
• Online shoppers: digital services and subscriptions are newly taxable in several states — check the Sales Tax Calculator before renewing a streaming plan with a US billing address.
• E-commerce sellers: revenue-only nexus rules mean registration is now driven by sales volume, not order count; the Sales Tax Calculator helps estimate what you owe per state.
• High earners: Washington's new 9% top capital gains rate affects large asset sales there; the Capital Gains Calculator models the federal side.

For a full state-by-state breakdown, see our Complete US 50-State Tax Guide.

The Big Picture

2026 continues a multi-year trend: states compete on income tax rates while quietly expanding what sales tax covers. For taxpayers, that is good news on paychecks and a reminder to re-check digital purchases and seller registrations. The rules change every year — our calculators are updated with the current rates so you are not guessing.