It has to figure out how much of a state refund is taxable if any. It should ask you every year. And starting in 2018 Deductions for state taxes were limited so there is more to calculate for it.
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.
