The São Paulo State Finance Secretariat (Sefaz-SP) issued a ruling on Thursday (November 27th) stating that the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS) should be included in the ICMS tax base, but should not be included in the 2026 test year. This interpretation, given in response to a tax consultation, is the third state ruling on the matter and creates a scenario of legal uncertainty for 2026 and certain litigation for 2027, according to tax experts.
São Paulo, Pernambuco, and the Federal District agree that the IBS and CBS should be included in the ICMS tax base starting in 2027. However, while São Paulo and the Federal District explicitly waive inclusion in 2026, Pernambuco responded to a tax consultation with the understanding that the new taxes should be included in the tax base even in the test year. So far, only these three states have commented on the matter.
According to the São Paulo tax authorities in Response to Tax Consultation 30661/2024, According to Complementary Law 87/1996 (Kandir Law), the ICMS tax base is the total value of the transaction, including all taxes that make up the price, including PIS and Cofins (according to the understanding of the Superior Court of Justice in Topic 1231). Since the CBS replaces these two taxes, the argument of the São Paulo tax authorities is that the tax should be included in the tax base. The IBS, which will replace the ICMS itself and other state taxes, would also fall under this logic.
However, according to Sefaz-SP, payment in 2026 will be waived because the IBS (0.1%) and CBS (0.9%) rates are merely indicative, and collection is waived in 2026.
“What the São Paulo tax authorities understand is that the values will not be included in the tax base in 2026 because there is no economic impact,” says Letícia da Gama, from the law firm Bergamini Advogados.
The Federal District also understands that IBS and CBS should be included in the ICMS calculation base starting in 2027, dispensing with inclusion in 2026 because the test rates are symbolic, without financial effects, explains tax lawyer Douglas Mota, from Demarest. "São Paulo and the Federal District are following the same line," says Mota.
Pernambuco, which was the first to comment on the issue, stated that IBS and CBS should be included in the calculation of ICMS in general, regardless of whether they are collected, because they are taxes that make up the price.
The state of Pernambuco did not specifically mention 2026 in its response, but since the taxpayer's question was about next year, many tax experts understood that the state's position is that the taxes must be included in the ICMS (Value Added Tax) base starting next year.
“Pernambuco’s position has generated a lot of apprehension because, regardless of the debate for 2027, charging in 2026 is even more incorrect, because without collection there is no financial impact,” says Sergio Villanova Vasconcelos, from the ButtiniMoraes law firm. “We could have litigation as early as 2026, in Pernambuco and other states that express the same opinion.”
“I believe it’s a mistake on the state’s part and they will possibly reverse it. Because there is no legal basis for including in the ICMS calculation base a tax value that will not actually be collected, that has no economic impact,” says tax lawyer Camila Tapias, founding partner of Utumi Advogados.
Explosion of litigation
For tax experts, the states' agreement on including IBS and CBS in the ICMS tax base starting in 2027 should lead to a legal dispute that could last for more than 10 years, until the STJ and the STF settle the issue.
Camila Tapias states that this view goes against everything the tax reform proposes, such as fiscal neutrality and the end of taxing taxes on taxes.
Furthermore, Douglas Mota from Demarest argues that the claim that IBS and CBS are part of the price doesn't make sense because the new taxes are calculated separately from the price.
“Article 13 of Law 87 states that everything charged to the purchaser must be included in the tax base. But the IBS and CBS are not charged by the company; they are taxes calculated separately. Therefore, it is a tax, not a price,” argues Mota.
Another argument is that forecasting new values in the tax base requires express legal provision, according to the principle of legality, and this provision does not exist for IBS and CBS, explains Letícia da Gama.
Legislative silence and legal uncertainty
The other 24 states are expected to publish their positions on the matter in the coming days, as companies need to know how to proceed as early as January 2026. Sources at all three levels of the federal government have already told JOTA that, given the legislative silence, the trend is for states to mandate the inclusion of IBS and CBS in the ICMS tax base.
The initial idea behind the tax reform was that new taxes would not be included in the base of old taxes, so much so that there was an express provision for this exclusion in Constitutional Amendment Proposal (PEC) 45/2019, one of the two that originated Complementary Amendment 132/2023. However, during its passage through Congress, this section was removed.
“This omission creates enormous legal uncertainty. There’s no way to believe that litigation will decrease in this scenario,” says Tapias. “It’s a tragedy that was expected.”
According to the lawyer, the large number of lawsuits should not be limited to ICMS (a Brazilian state sales tax), but should also include ISS (a Brazilian municipal service tax), which has the same calculation method as ICMS.
Currently under consideration in the Chamber of Deputies is Complementary Law Project (PLP) 16/2025, which aims to expressly exclude IBS and CBS from the ICMS tax base, by amending the Kandir Law. The project is awaiting a report from the Finance and Taxation Committee (CFT).
But with the omission of the topic in LC 214, if the PLP is approved after 2027, the consequence should be high levels of litigation — the discussion would shift to a dispute over whether the law is legislative or merely interpretative, explains Mota, from Demarest. “For revenue-raising reasons, for the same reason the topic was removed from PEC 45, I doubt the PLP will pass,” states Camila Tapias.
Tax experts argue that discussions regarding the inclusion of IBS and CBS in the ICMS tax base are likely to extend far beyond the reform's transition period (until 2032), considering the average time it takes for major tax issues to be resolved in the courts, which can take 10, 12, or even 15 years. In other words, it is very probable that the courts will still be debating the issue years after the ICMS is abolished.
“"This discussion is a very good example of the importance of tax reform, of having a unified understanding instead of a different position from each state," says Sérgio Villanova Vasconcelos.