States got creative and created a state tax that was deducted on partnerships and S corporations tax returns (otherwise called pass-through entities) resulting in lower federal taxable income. This tax is in turn credited on the business owner’s individual tax return for the state. In other words, the business pays for the human’s state income taxes and this lowers the federal income associated with the business.
This also called the great SALT work-around. Cash is cash to a business owner whether it is spent by the business or the human.
Why is the PTE tax deduction considered an S corporation benefit? Your single-member LLC is not considered a pass-through entity, but if you slap an S Corp election on it, you suddenly have this deduction available to you.