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N.H. Announces It Will Sue Massachusetts over Cross-Border Income Tax Collection
- snuxoll 6y agoInteresting, I’m not quite certain how a state has the authority to tax residents of another state to begin with. Anyone have some case law on the subject handy? EDIT: I’d like to add in purely talking about W-2 or 1099 income tax. There are various other arguments to be made about income from sources such as ownership in a corporation or partnership registered in a foreign state that I’ve no desire to get into, as that’s possible to work around by moving the entity.
- ghaff 6y agoI don't have any case law and am not a lawyer, but if you live in one state and work in another, the state you work in can absolutely tax you. As I understand it, there's some truing up between the states, but in this case it's pretty simple. Even if you live in no income tax NH, if you work in relatively high tax MA, you pay MA taxes.
- rlanday 6y agoThe issue here is the people no longer work in Massachusetts. They may not even be setting foot in Massachusetts. My situation is that I used to work in Google’s NYC office but live in New Jersey (and have lived here since pre-COVID) and have set foot in New York maybe like six times since March, never for any work-related purpose, yet New York is still withholding income taxes.
- ghaff 6y agoSure. And people I know are moving officially remote to NH and will not be going into an MA office except rarely so they will/should no longer be on the hook for MA income taxes.
- ghaff 6y agoCan't Google switch your status to remote? Or won't they? I think that's how things work where I am. (It doesn't really matter in my case as I live in the same state as my officially assigned office where I set foot in maybe a half dozen times in the past year.)
- rlanday 6y agoThey could, but they won’t. I think one reason is that management is trying to maximally maintain the pretense that we’re all going to return to the office in July (I don’t see how we can make everyone go back after ~15 months without losing a bunch of employees) to keep their options open. Another is that I think Google doesn’t want to pick a fight with a state government we have thousands of employees in, or get bad press for looking like we’re trying to get out of paying taxes; in both cases, it’s better for the company for employees to take independent action (e.g. asking New York for the money back when we file our returns and making the state government deal with us all individually if it really wants to play this game).
- ghaff 6y agoGood luck though I suspect it will be challenging to the degree that your employer says that you are working out of a given office to claim otherwise.
- jessaustin 6y agoWhen California came after me for Hawaii income, all I had to do was send them a copy of my Hawaii returns. Someone who lives in NJ will file taxes there anyway.
- rlanday 6y agoMy concern is that I will file the New Jersey return and pay taxes on the money I earned while working and living there, and file the New York return and ask for my money back since I don’t live or work there, and if New York denies the refund, I’ll be paying taxes in both states. It’s unclear at this point whether New Jersey will let New York claim all this taxable income or whether New Jersey will try to claim it for itself (it needs the money too). The tax rates are pretty similar in both states but my preference would be for the money to go to the state I actually live in.
- ransom1538 6y ago"yet New York is still withholding income taxes" That is google. They don't have to withhold that. IF google didn't withhold that state tax -- it would be impossible for NY to figure out how much it is owed. You can ask google to not withhold for NY with a HR meeting.
- rlanday 6y agoThe withholding is based on Google’s understanding of the law (it’s not like they could just decide to not do it). I can’t ask Google to change their interpretation of the law since I’m not a lawyer.
- beezle 6y agoIt often revolves around whether the company has a physical place for you to work. Just because you are not using it may not alter the tax situation.
- rlanday 6y agoNew York has a rule about “convenience of the employer.” The name is misleading and doesn’t make any sense, but basically if there was no way to do the work in New York (e.g. your company sent you to New Jersey to hook up someone’s internet), it’s not considered New York-sourced income, but otherwise it is. The issue with the current situation is that in principle I could be doing the work in New York (it doesn’t matter where I do it), but the office is closed and I don’t live in New York. So I have strong reasons for not doing my work in New York, but in principle I could be doing it there. I guess there’s a further clause that you have to spend at least one day out of the year in New York to be taxed there, which unfortunately I have done (despite no longer traveling there for any work-related purpose).
- clarkmoody 6y agoThe United States claims global taxation over its subjects. It's a similar concept.
- dantheman 6y agoAlso immoral and wrong.
- koolba 6y agoI’d argue the global taxation at the Federal level is more justified. You’re paying for the right to flee back from anywhere on Earth and have the doors of the USA swing open for you.
- randyrand 6y agoyou're paying for much more than just that, realistically. It's a lot of money.
- imgabe 6y agoCitizens of every other country in the world are also able to flee back to their home country without having to pay tax in a place they don't live.
- Natsu 6y agoAs I recall, the tax is set so that it only affects people getting a relatively hefty amount of income and there's a credit on taxes paid outside the country. But yeah, it's complex and it sucks and everything I know about it came from reading patio11's posts on it.
- patio11 6y agoThere's a Foreign Earned Income Exemption which will eliminate the tax payment requirement for most people on wage income, but you'll be taxed on investments/interest from the first dollar. People with income higher than the FEIE who pay taxes to a high-tax high-service jurisdiction (like Japan) will generally use the foreign tax credit to take care of most of their liability; folks who live in a low-personal-income jurisdiction like Hong Kong and are high-paid get smacked pretty hard. There exists a plethora of compliance problems which are worse than the actual taxation, for example the PFIC regulations which make it non-economic to do standard middle class investment abroad for e.g. a child's education. Advocates for Americans overseas are trying to get the PFIC and FATCA regulations overturned or get safe harbors expanded dramatically, but there exists a feeling in Washington that the only Americans who'd have bank accounts or mutual funds outside the US are "fat cats" (get it?) trying to abuse the tax system rather than pretty typical taxpayers with pretty typical life choices.
- koolba 6y agoIf you work in another state then your subject to their tax jurisdiction. The issue here is you’re not actually setting foot in the other state so it’s looking more like a cash grab. I’d bet the question is gonna hinge on whether the office location of the work has been updated in company records. If your “office” is still on the corporate books in Taxachussets then you’ll have to pay.
- strombofulous 6y agoWhy does it matter where you (physically) step foot? I think WFH has proven that crossing the physical of land barriers is no longer required to do much of anything.
- koolba 6y agoBecause when you walk into some other State’s backyard they have the right to demand a toll. Somewhat related, if you’re on the books as working out of their backyard, they will again demand a toll.
- rlanday 6y agoIf a Google employee ostensibly works in “the NYC office” but hasn’t set foot in the office in over >6 months (will be like 15 months by the time Google’s asking people to be back in July), lives in another state (e.g. New Jersey, maybe the employee took advantage of the remote work conditions to Florida or Texas)…how long should New York be able to tax this person despite the fact that they don’t live or work in New York? Google’s also not headquartered in New York. Google could move everyone in the computer to e.g. the Seattle or the Austin office (but are currently refusing to do so) if we’re all working remotely anyway.
- free652 6y agoAs long as he works for NY office he will pay NY taxes. He would need to ask Google to switch his office's location.
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- tclancy 6y agoDon’t look at Maine then. They come for your spouse too.
- patio11 6y agoTaxation isn't primarily by residency but rather by income source, and sourcing rules make it very easy to have income attributed places other than where you live. (I was taxed by both California and Illinois in 2019 despite continuous residence in Tokyo, due to being physically present in each jurisdiction for N days and working during some portion of them, with N in the ~20ish region.)
- ghaff 6y agoI expect a lot of those workers will go remote to WFH from NH indefinitely. I've know a lot of people over the years who commuted from NH to MA. Over time, I've seen more and more of them move remote. And I see a ton doing it at the moment. (MA is relatively high state income tax and NH is zero.)
- free_rms 6y ago5% isn't really that high unless you're comparing to zero. And, right at the border, NH property taxes are correspondingly higher. Gotta pay for stuff somehow, it's not the federal government.
- ghaff 6y agoNH property taxes [can be] high but, even in southern NH, property prices are a fair bit lower than the immediate Boston area for the most part. "Taxachussets" isn't really that bad these days compared to, say, California in terms of taxes. But it's still a lot higher than NH which doesn't provide the level of services that MA does in general.
- bitwize 6y agoBack in the day, in Connecticut we used to quip about "Taxachusetts", but now Connecticut business mainstays like GE are moving north because the Massachusetts tax regime isn't so bad compared to where CT has gotten.
- free_rms 6y agohttps://en.wikipedia.org/wiki/State_income_tax https://en.wikipedia.org/wiki/State_income_tax -- Mass is in the middle of the pack for total tax burden, way below places like Mississippi for example. "Taxachussetts" is catchy, and MA is culturally liberal, so the perception sticks.
- throwaway0a5e 6y agoIf you're a jerk and you're ugly you're gonna get called ugly more often than if you're just ugly. Massachusetts has a lot of stuff wrong with it governmentally and culturally (none of which have much to do with where the state falls on a left/right axis) so nobody is gonna cut it a break when it comes to taxing people.
- ryandrake 6y ago> Massachusetts previously allowed out-of-state residents who worked for Massachusetts-based entities to deduct whatever portion of their income was derived while working from home. Does the same thing happen along the NV CA border, where the income tax difference is even more extreme? 0% vs top marginal rate of 12.3%? My guess is no, otherwise NV border towns would be chock full of tech workers WFH'ing from a zero income tax state.
- ghaff 6y agoYes, NV and CA have borders but that border isn't anywhere near where most of the tech workers live. Also, CA is notoriously aggressive about chasing income from out of state residents.
- dragonwriter 6y ago> Does the same thing happen along the NV CA border Well, the same thing happens for nonresident remote workers with CA employers: https://www.palmspringstaxandtrustlawyers.com/nonresidents-working-remotely-for-california-businesses/ https://www.palmspringstaxandtrustlawyers.com/nonresidents-w... > NV border towns Aside from Stateline and Incline Village and other places around Lake Tahoe, towns on the NV side (really, either side, but the NV side is germane here) of the CA-NV border aren't exactly places that are attractive to live, and even those few aren't convenient commuting distance for the occasional office visit for the kind of WFH job where being close to the office in CA would matter, because the CA tech hubs aren't anywhere near the NV border. So, if you are going to work remotely out-of-state for a CA firm for tax advantage, you aren't especially likely to do it from an NV border town, as opposed to somewhere else in NV or an even more distant low-tax state.
- caturopath 6y agoCorrect. Out-of-state commuters have to pay CA income tax. If they didn't, LAS would be the busiest airport in the country.
- bitbckt 6y agoNV residents who are 1099 employees of a CA corporation pay CA income taxes for the days which are spent on-site in CA. If that number is 0, all the better - no dealings with the FTB need to happen at all. Having roots in NV myself, and knowing a number of friends who currently work at FAANG companies who’ve moved back, I’ve heard the typical salary cut corresponds roughly to the CA income tax they’d otherwise pay (~12%). It isn’t similar to NH/MA, because it isn’t feasible to commute from NV geographically.
- ycombonator 6y agoGood ! Mass needs do live within its means. I suggest government officials of the politburo giving up their enormous suburbans and government drivers.
- nimbius 6y agoworth noting that the 5-4 opinion was written by Justice Samuel Alito in 2015...two states cant tax double-dip on a single tax payer. https://www.supremecourt.gov/opinions/14pdf/13-485_o7jp.pdf https://www.supremecourt.gov/opinions/14pdf/13-485_o7jp.pdf I cant imagine Massachusetts winning this.
- lsllc 6y agoNH has no income tax so technically there's no double-dipping! (I also don't believe MA will win)
- resoluteteeth 6y agoNew Hampshire has no income tax so there's no double dipping.
- danielfoster 6y agoThere is double-dipping in the sense that you shouldn’t be subject to two states’ tax regimes at the same time. The amount collected doesn’t matter.
- awb 6y agoI don't think you are subject to a tax regime if they don't tax you. However, taxation without representation would be a bigger issue. How can MA tax someone who is a NH resident and isn't allowed to vote in MA?
- staticman2 6y agoThe same way legal immigrants are taxed who can't vote.
- sys_64738 6y agoNY already does this. It’s called the telecommuter tax.
- lsllc 6y agoThis is a bit dated, but some states have pledged not to tax telecommuters working in different states during the pandemic, but others like NY and CA are being fairly aggressive about taxing them: https://www.wsj.com/articles/remote-working-from-a-different-state-beware-of-a-tax-surprise-11590744601 https://www.wsj.com/articles/remote-working-from-a-different...
- Izkata 6y agoCA especially, some months ago I remember reading about them considering a retroactive tax - you'd have to pay if you lived in the state any time within the past 10 years. I have no idea if it was dropped, is in limbo, or may actually happen.
- lotsofpulp 6y agoI would be surprised if any courts held up a retroactive tax. Perhaps it was grandstanding?
- jedberg 6y agoI had a friend who lived in NH and worked in MA. He said he kept a detailed diary down to the minute of when he was working in each state. He said it was worth the overheard because of all the MA taxes he didn't have to pay.
- deleted 6y ago[deleted]
- peteretep 6y agoHot-take prediction: this will end up to be one of those situations where other rich countries with a federal system have battle-worn solutions (Germany? Switzerland?) while America wrings its collective hands and says “it could never work?!”
- smnrchrds 6y agoI can vouch for Canada. In Canada, you pay federal income tax plus provincial income tax to the province of your residence. You also get services (e.g. healthcare) from the province of your residence. If you live in one province but work (remotely or in-person) in another province, the company deducts taxes based on its own location. When you file taxes at the end of the year and indicate your province of residence, taxes get recalculated based on that and you either have to pay or get a refund. Taxes already deducted will automatically get transferred to the province of residence (it may be a bit different if one of the provinces is Quebec. In that case, some more manual intervention may be required. But the taxes owed are still calculated based on residence). If you move your residence during the year, your residence as of December 31 are used for calculating taxes.
- kbos87 6y agoI don’t know that I agree with MA in this case, but you can’t ignore the broad context. New Hampshire has, for decades, been in aggressive pursuit of revenue from MA residents. - The shopping malls just across the border where MA residents don’t have to pay sales tax - just tolls (An employee at the Salem Apple store once divulged to me that it was the highest grossing Apple store in the world) - The state run, tax free liquor stores just across the border that attract droves of MA residents - The ease of procuring fireworks and weapons (the former illegal in MA, the latter far more difficult to obtain) just across nearly every border crossing New Hampshire might to some extent have a valid point here, but it also feels like they won’t tolerate a taste of their own medicine.
- handmodel 6y agoI am a former NH resident. I think our collective argument would be that it is not our fault that Massachusetts decides to tax all their own businesses to an absurd degree. If you raise taxes there is a trade-off (often worthwhile) that involves business and people leaving your area.
- supernova87a 6y agoGenuine question curious to discuss with others: what is the purpose of states now anyway? States have all the inefficiency of competing against each other for tax dollars, having to promulgate separate laws and regulations, school curricula, inefficiencies in sharing information, it goes on and on. On the plus side (I'm trying to brainstorm) states enable (do they?) people to live in places with different ideals or laws, or standards of living? Is that true? Do people go somewhere to live because the state political/governmental structure is different from another? Does it protect or enable extremely conservative (or radical) communities that would be washed out to the average otherwise? Is it a protection against broad brush government that cannot know or correctly allocate funds and attention to small jurisdictions? Other than to emphasize or give power to certain differences in population that were baked in long ago, what purpose do states serve? In a country where people move and work almost without boundaries? Why not delegate some of the finances / taxation / regulation functions to the federal government? Is it more effective at a local level?
- ceph_ 6y agoI'd jokingly counter with what's the purpose of middle managers? We can just get rid of the middle layers of the bureaucracy right? But the pandemic should be a good example of the role state governments play. In this case with picking up the slack when the federal government is refusing to take action on a problem.
- rossjudson 6y agoThe political structure of the USA is so screwed up at this point that I view leaning towards states' rights as one of the only viable pathways for the country to survive. Having Red and Blue come together is apparently not going to happen, and it's just getting worse and worse. Maybe the opposite is the way to go. A radical shift in power towards the states gives every subculture their own laboratory to live or die in. Liberal values can be protected in liberal states, and you'd see the opposite in conservative states. Maybe we could stop fighting for the federal right to shove our ideologies down the throats of states that don't want them. Different places would do different things, and that would be alright.
- fortran77 6y agoGood! I hope they prevail. California's legislators are talking about taxing Californians for up to 10 years after they've moved from California! https://www.bizjournals.com/sanfrancisco/news/2020/08/18/will-affluent-residents-leaving-california-still-h.html https://www.bizjournals.com/sanfrancisco/news/2020/08/18/wil...
- rossjudson 6y agoIf you get a stock grant in California, you owe California income tax on every share that vests from a block that is awarded in CA. The income tax is prorated by the number of months that you were a resident in CA, relative to the vesting point. I left CA about a year after a stock award and had to pay CA state tax for 3 years after leaving (but each year the rate would decline). There's a serious WTF moment when you find this out, particularly when you pick up from CA and go to WA (a state without income tax).