Discussion:What state does this person pay taxes for his business?

Does the state of DC have to do anything with this if his LLC is in Virginia? He has income from all over the country.

http://www.law.com/jsp/article.jsp?id=1182157545372

Yes, it probably means that more states will assert jurisdiction over credit card issuers (MBNA) and intangible holding companies (Lanco) -- in fact, more assertion of economic nexus in general. You can't read any meaning into denial of cert ... and yet ... and yet ... surely if the Court thought the state courts were on the wrong track, they would have taken at least one of these cases. Hard to see where they would find a cleaner fact situation than MBNA. Seems they are willing to let the states do what they want ...

FIN 48, anyone? Hooee ....

" My Dear Hugo:

I was sorry to hear that you had the flu. But I am glad that you are taking care of yourself. Take good care, lie low, and forget about these dull tax cases – which are now droning on and on … We miss you. Hope to have you back, soon. Ever yours, Bill "

Excerpt from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980694

He has an office that he only meets clients at to show presence rather than meeting at his home. I am sure you have heard of the rent a space offices suites. Anyways, what type of guidance do you have on someone having to pay if he receives income from another state.

Here is the questions I ponder:

You all tax preparers prepare returns from people all over the country, Where do you pay tax? File a return for every state or just pay taxes in your state.

Or lets say that tax preparer visited a client in another state and performed services there, then would this person need to file NR return and pay taxes for the revenue they received from that client in that state.

Seems to me your client's situation is similar. Understand I am talking about corporate and business taxes. Because of a reciprocal agreement between Pennsylvania and New Jersey, as an employee I do not file in PA, but the corporation does withhold Philadelphia Wage Tax.

I realize the VA, DC and MD all reciprocate with each other, so that individual tax is paid in the state of residence, BUT I would note that NJ and PA do not reciprocate were I to be unincorporated and filing Schedule C. In that case I would pay PA. I do not know if this is the case with DC, VA and MD. I do know from several DC residents with businesses that they have a number of business forms to file [Personal Property, Arena Tax???]. Your client does have a presence in DC, and might be subject to these taxes. This is your bailiwick, and it is where you must show your knowledge. I would suspect KatieJ knows the answers, so perhaps she will reply. She is an amazing resource on this site for these questions.

Sounds good. I am going to review the reciprocation and see if taxes need to be filed in DC.

Thanks,

Bj

I was with one of the major accounting firms in the late 1980s when its consulting arm was audited by the State of Colorado. They had a big consulting engagement in Denver and had a number of pretty highly compensated individuals, nonresidents of CO, spending months in the state at the client's offices. The firm had not withheld Colorado income tax from their salaries. There was talk of criminal prosecution. That firm, and all the other major national accounting and law firms, pretty quickly got into compliance, and from then on we had to report on our time sheets not only what client we worked on each day, but where we did the work. Anyone who has worked for a major accounting, law or consulting firm since the late 1980s will probably tell you the same thing. Of course a lot of smaller firms fly "under the radar" and many are not even aware that they are subject. But there is no question about the states' jurisdiction to require nonresident individuals to pay tax on income earned from the performance of services in the state.

Some states have de minimis rules, and some have reciprocal agreements with contiguous states whereby a resident of one state working in another pays taxes only to the state of residence. And the District of Columbia cannot tax nonresident individuals' earnings under the Home Rule Act.

On the other hand, if I sit in my office in San Diego and prepare a Colorado income tax return for my client, that doesn't make me taxable in Colorado. For individual income taxes the source of income from personal services is where the service is performed, not where the client is located or enjoys the benefit of the service.

Each state defines nexus individually. Most often though as Katie said, it is a de minimis rule that prevails. Most, if not ALL of the states offer a nexus questionaire to determine if the person is taxable in that state due to his activities in that state. But if they perform services IN the state within the confines of the state lines, then most likely it is income sourced in that state regardless of where the individual resides :)

I do practice in NJ but this is a bit out of my purview, so take my answers with a grain of salt and wait for KatieJ to pipe up! She is our expert on this, but that being said, we'd love to have your money so we don't have to sell the Turnpike.

Maybe your local CPAs were thinking of sales and use taxes. In that case, they would be correct; sales of TPP are subject to sales and use tax; sales of services (other than specified ones, not including consulting) are not.

You and your corporation have nexus in NJ any time you are physically present in NJ performing services on behalf of the corporation. It doesn't matter that you are on the client's premises and have no location of your own in NJ. Since you state that you will be working in NJ for "several months," no de minimis rule would protect you. You should register the corporation to do business in NJ and as a NJ employer, and withhold NJ income tax from your salary.