Did you get a 1099G for it? Is it showing up as taxable on Schedule 1 line 1 which goes to 1040 line 8?
A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.
