We tracked more than a dozen federal and state compliance updates current through October 2026. Two of them touch nearly every US business: the new $2,000 Form 1099 threshold and the 2027 payroll rates. Most of the rest are state sales-tax changes that only matter where you sell.
This roundup pairs every change with who it affects and what to do about it, and it dates each item to when it actually takes effect. Several land on January 1, 2027, so there is time to prepare before the effective dates.
TL;DR
- Start with the triage table: one row per change, with who it hits and what to do, so you can rule yourself in or out in about a minute.
- Federal tax: the Form 1099 reporting threshold rises from $600 to $2,000, and the Section 250 deductions for foreign and export income shrink.
- Payroll: the 2027 Social Security wage base, minimum wages, paid-leave rates, and overtime-exemption thresholds are set for Washington, Massachusetts, and California.
- Sales and use tax: California tightened two rules, Connecticut added a town-level report, and several states changed local rates and lodging taxes.
- Foreign-owned entities and proposals: a short section on what shifts for non-residents, plus two proposed Texas changes that are not yet final.
Triage table: which of these apply to you
Start here. Each row is a complete answer. If none of these describe you, skip to the deadlines list.
| Change | Effective | Who it hits | What to do | By when |
|---|---|---|---|---|
| Form 1099 threshold $600 to $2,000 | Tax year 2026 | Businesses making nonemployee comp and certain 1099-MISC payments | Track 2026 vendor payments against $2,000 | 1099s filed in early 2027 |
| Section 250 deduction cut | Tax year 2026 | US C-corps with foreign or export income | Revisit tax projections with your advisor | 2026 returns |
| Social Security wage base | Jan 1, 2027 | Employers with higher earners | Update the withholding cap to $192,300 | First 2027 payroll |
| 2027 minimum wages | Jan 1, 2027 | Employers with staff in WA or CA | Raise pay to the new state or city floor | First 2027 payroll |
| Paid-leave and exemption thresholds | Jan 1, 2027 | Employers in WA, MA, or CA | Update PFML rates and exempt-salary floors | First 2027 payroll |
| California exempt salary floor | Jan 1, 2027 | CA employers with salaried exempt staff | Pay at least $72,384 or reclassify | Jan 1, 2027 |
| California shell-company use tax | In effect | CA residents buying via out-of-state LLCs | May owe CA use tax; owners can be liable | Now |
| Connecticut town-level report | Oct 1, 2026 | CT consolidated-return retailers | File the quarterly disaggregated report | Quarterly |
| Arkansas local rate cuts | Jan 1, 2027 | Sellers into Harrison, Boone, Lafayette | Confirm the new local rates; update tables | Jan 1, 2027 |
| Alabama local-tax administration | Nov 1, 2026 | Businesses liable for local sales, use, rental or lodging taxes in Opelika and Cleveland | Move local tax filings to the Alabama DOR via My Alabama Taxes | First state-filed returns due Dec 21, 2026 |
| Alabama Winston County lodging tax | In effect (Nov 1) | Lodging operators in Winston County | Collect the new 8% tax plus $5 per room | Now |
Does your business need to act on these changes?
Most of these items are state-specific. If you have no US employees, no reportable contractor or other payments approaching the new $2,000 threshold, and no sales or business activity in the states below, you may have little to do this month.
The two with the widest reach are federal: the higher 1099 threshold and the Section 250 changes. Read those first.
Federal tax
Two federal changes are now in effect for the 2026 tax year, both enacted by the 2025 tax law. Neither is new in October, but both are worth checking before you file.
The Form 1099 reporting threshold jumped from $600 to $2,000. For payments made during 2026, businesses report nonemployee compensation on Form 1099-NEC, and certain Form 1099-MISC payments such as rent, only once total payments to a payee reach $2,000. The old $600 rule still applies to 2025 payments.
The $2,000 figure is indexed for inflation starting in 2027, and it also becomes the dollar floor for 24% backup withholding. The separate 1099-K threshold is unaffected. Recipients still owe tax on all income, whether or not a form is issued.
Section 250 deductions shrank for foreign and export income. For tax years beginning after December 31, 2025, the deduction for net CFC tested income (NCTI, formerly GILTI) falls from 50% to 40%, and the deduction for foreign-derived deduction-eligible income (FDDEI, formerly FDII) falls from 37.5% to 33.34%.
The effective US tax rate on that income rises to roughly 12.6% for NCTI and about 14% for FDDEI. These are rates before foreign tax credits, so a taxpayer's actual rate varies.
OBBBA also repealed the tangible-asset carve-out that used to reduce NCTI. If you have this exposure, revisit your projections with your tax professional.
Payroll: 2027 rates are set
Most payroll changes announced in October take effect January 1, 2027, so the work now is updating settings before your first January payroll.
The Social Security wage base rises to $192,300 for 2027. That is up $7,800 from $184,500 in 2026. The Social Security tax rate stays at 6.2% for each side, so the maximum tax per employee rises to $11,922.60.
Only wages up to the base are subject to Social Security tax, while Medicare tax still applies to all wages. Update your payroll withholding cap before your first 2027 payroll.
Minimum wages rise in Washington and California. Apply the rate for where each employee actually works, since several cities set floors above the state rate.
| Jurisdiction | 2026 | 2027 |
|---|---|---|
| Washington (state) | $17.13 | $17.73 |
| Seattle | $21.30 | $22.14 |
| California (state) | $16.90 | $17.40 |
Washington paid-leave premium. Washington's Paid Family and Medical Leave premium rises from 1.13% to 1.2% of wages for 2027, up to the annual Social Security wage cap of $192,300. The 2027 contribution is split between employees (70.7%) and employers (29.3%).
Employers with fewer than 50 employees are generally not required to pay the employer share. Update your payroll settings before the first 2027 payroll.
Massachusetts paid-leave split changes. Massachusetts keeps its total Paid Family and Medical Leave contribution rate at 0.88% for employers with 25 or more covered individuals in 2027. However, the contribution split changes from January 1, 2027. Employers must contribute 60% of the family-leave portion instead of the medical-leave portion.
Employees can contribute up to 100% of the medical-leave portion and up to 40% of the family-leave portion. The maximum employee contribution remains 0.46% of wages. Employers with fewer than 25 covered individuals continue to pay no employer share.
Washington set higher overtime-exemption thresholds for 2027. These thresholds decide whether a salaried or computer-professional employee can stay exempt from overtime. An employee paid below the applicable floor must be reclassified as non-exempt or have pay raised.
| Washington 2027 threshold | Amount |
|---|---|
| Exempt salary, 51 or more employees | $92,196/year |
| Exempt salary, 50 or fewer employees | $82,976/year |
| Hourly computer professional | $62.06/hour |
California's exempt salary floor rises to $72,384. Because the white-collar exemption requires twice the state minimum wage, the minimum salary for exempt executive, administrative, and professional staff rises to $72,384 a year in 2027, up from $70,304.
The salary floor is necessary but not sufficient, since the role must also meet the duties tests. Pay at least that amount and confirm the duties tests, or reclassify the role as non-exempt.
California also enacted a separate $19.75 minimum wage under AB 2646. It applies specifically to H-2A "approved agricultural employees" and the domestic workers doing the same work, not to all farmworkers.
Sales and use tax
Two California changes lead this month, Connecticut added a reporting step, and several states adjusted local rates and lodging taxes.
California narrowed the out-of-state LLC vehicle loophole. SB 1406 targets using an out-of-state entity, often a "Montana LLC," to register a vehicle, boat, or aircraft and avoid California use tax.
It generally reaches closely held entities that are 50% or more California-resident-owned, and entities that qualify as a shell company where even one owner is a California resident.
The tax can apply when the vehicle, boat, or aircraft is brought into California within 12 months of purchase, and the state can hold the owners personally liable. It does not make every out-of-state LLC purchase automatically taxable.
California enacted an infant-formula sales-tax exemption. SB 1151 was signed September 27, 2026 and took immediate effect as a tax levy, but its standalone exemption operates from January 1, 2027 through 2040.
The companion food-product language is declaratory of existing law, so the state's position is that infant formula was already exempt. Sellers should confirm their product tax codes treat infant formula as exempt, with the dedicated exemption in force from January 1, 2027.
Connecticut added a town-level sales report. Effective October 1, 2026, retailers that file a consolidated sales and use tax return must now file a Disaggregated Sales Tax Report each quarter, breaking out tax by town. This was previously an annual report.
The report is filed in addition to your return, with no additional tax due, and the underlying return frequency does not change.
These remaining sales-tax items are location-specific and only matter where you operate or ship:
- Arkansas: several local sales tax rates decrease on January 1, 2027, including in Harrison, Boone County, and Lafayette County. Confirm the new local rates and update your tax tables for those areas.
- Alabama, local-tax administration: the Alabama Department of Revenue took over administration of local sales, use, rental, and lodging taxes for Opelika and Cleveland on November 1, 2026. Businesses file through My Alabama Taxes, with the first state-filed returns due December 21, 2026.
- Alabama, Winston County: a new 8% county lodging tax plus a $5-per-room fee began November 1, 2026. This is a new levy, not an administration change, and is collected through My Alabama Taxes.
- Minnesota, Grand Rapids and cigarettes: the 0.5% City of Grand Rapids sales tax ends January 1, 2027, which lowers the combined rate there. Separately and statewide, the Minnesota cigarette sales tax rises from 84.0 cents to 87.7 cents per pack of 20 on the same date.
- Minnesota, Northfield: a new 3% lodging tax took effect October 1, 2026, administered by the state, on stays of fewer than 30 days.
- Indiana, Greendale: a new 1% food-and-beverage tax took effect November 1, 2026 on taxable food and beverage sales.
- Indiana, Montgomery County: the county innkeeper's tax on short stays rises from 3% to 5% on January 1, 2027.
- Illinois, Bourbonnais: a new 1% automobile rental tax took effect November 1, 2026, for vehicle-rental businesses there, 6% combined with the 5% state rate.
- Missouri: a standing reminder. Registered sellers must file a return for every assigned period, even one with no tax due, or risk penalties.
- Illinois and Washington: the Illinois Remote Retailer Tax Amnesty closed October 31, 2026, so review any missed back liability with a professional. Washington also updated local rates on October 1, and because it taxes by the buyer's delivery address, sellers should refresh their rate tables each quarter.
Foreign-owned US entities
A couple of this month's items land differently for foreign-owned US entities. The mechanics are in the sections above, so this is just the non-resident angle.
Section 250 (cross-border income). If your US C-corporation earns net CFC tested income or foreign-derived income, the smaller Section 250 deductions raise its US tax for tax years beginning after December 31, 2025.
California vehicle purchases. A non-resident who registers a vehicle, boat, or aircraft through an out-of-state LLC may owe California use tax under the new shell-company rule if a California-resident owner is involved.
Proposed, not yet final
Texas proposed treating EHR and EMR systems as nontaxable. The Texas Comptroller issued a proposed rule, published in the Texas Register on October 30, 2026, that would classify qualifying electronic health record and medical record systems, patient portals, and related healthcare technology as nontaxable information services.
It is open for public comment and has not been adopted, so current taxability is unchanged.
Texas also proposed untaxing online marketplace fees. A separate September 30, 2026 Comptroller order would amend the data-processing rule to stop taxing marketplace and platform fees, reversing treatment that began in October 2025.
Like the EHR change, it is a proposal that must still go through comment and adoption, so no action is needed yet.
Deadlines to diary
Confirmed upcoming dates worth putting on the calendar now:
- December 21, 2026: Alabama first state-filed local returns due for Opelika and Cleveland.
- January 1, 2027: Social Security wage base rises to $192,300; Washington, Massachusetts, and California 2027 payroll rates and exemption thresholds take effect; Arkansas local rate cuts; Minnesota Grand Rapids city tax ends and the statewide cigarette tax rises; Montgomery County, Indiana innkeeper's tax rises to 5%; California infant-formula exemption begins.
How FinStackk Helps You Stay Ahead of Compliance Changes
Complyy tracks 15+ compliance items across federal, state, and county levels, which can help you stay ahead of changes like the ones in this roundup.
Fin-Tax manages your tax and sales-tax deadlines and filings, and Fin-Hire handles payroll and payroll-tax compliance.
You work with a dedicated point of contact and can chat in real time with our CPAs and specialists. If you want a second set of eyes on what applies to your entity, get in touch.
FAQ
What is the new $2,000 Form 1099 reporting threshold, and when does it start?
For payments made during 2026, a business reports nonemployee compensation on Form 1099-NEC, and certain Form 1099-MISC payments, only once total payments to a payee reach $2,000, up from $600. The first affected forms are those filed in early 2027, and payments made in 2025 still follow the $600 rule.
The $2,000 threshold is indexed for inflation starting in 2027 and also sets the dollar floor for backup withholding. Recipients still owe tax on all income, whether or not they receive a form.
What is the 2027 Social Security wage base, and how much more will employers pay?
Social Security's taxable wage base rises to $192,300 for 2027, up $7,800 from $184,500 in 2026. The tax rate stays at 6.2% for the employer and 6.2% for the employee, so the maximum Social Security tax per side rises to $11,922.60 at the cap.
Only wages up to the base are subject to Social Security tax, while Medicare tax still applies to all wages. Update your payroll withholding cap before your first 2027 payroll.
Did California change the rules for infant formula and out-of-state LLC vehicle purchases?
Yes, through two separate 2026 laws. SB 1151, signed September 27, 2026, codifies the existing sales-tax exemption for infant formula, with its standalone provision operative from January 1, 2027.
SB 1406 can treat an out-of-state entity used to register a vehicle, boat, or aircraft as a California resident for use-tax purposes, generally when California residents hold 50% or more, or a single owner for a defined shell company. The owners can also be held personally liable.
Confirm how either applies to your situation with a tax professional.