5 ms·

This is ultimately what I’m questioning though. If I work for a MA based company, how do they have any claim to a portion of my income when I have no residency

This is ultimately what I’m questioning though. If I work for a MA based company, how do they have any claim to a portion of my income when I have no residency status there? States aren’t allowed to tax interstate commerce, after all, and not being a resident there I would have no vote for the state houses that determine tax laws. I live in ID and work remotely for a CA-based company, so I’ve got a personal interest in this if CA ever decided they wanted to pull a similar move. Interested to see what the result would be if this got to the SCOTUS.

neltnerb 6y ago
Superficially, it sure seems unjustifiable and I live in MA. I sure hope it's not allowed, I wouldn't want to have to pay income tax for every state in which I have a client that I earn money from. "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. In practice, this meant a worker who commuted four days a week but worked from home one day a week could reduce their taxable income by 20 percent." So MA knew what was justifiable, and is now not doing it. Based on this reading if I take my MA incorporated LLC and move to another state I'm still supposed to pay a chunk of income tax to MA? I guess for me it's easy enough to reincorporate in a new state or country, but it's clearly ridiculous to try to grab taxes out of what I'm already paying the place I actually live and the state I actually do work from.
- lsllc 6y ago
  That's always been the way. If you register your LLC in Delaware or Nevada and live in MA, you still have to register it as a "foreign corporation" and pay the annual fees (which is approx the same as just having an MA registered LLC). And since you're "earning" in MA, yeah you'll have to pay MA taxes on that. And if you have a co-founder in a different state, chances are they'll have to do the same in that state.
  - Hello71 6y ago
    but do you have to pay Delaware or Nevada taxes?
    - lsllc 6y ago
      I don't think so, I've heard the adage "taxes are paid where the money is made" (and Nevada has no income tax). I think the reason for a Delaware or Nevada LLC is on the registration fees, the organization aspect; the governance of the LLC -- it's easier to run, less regulation. Typically there's no way out of the taxes, because if your home state has taxes, they'll find a way to make you pay.
      - neltnerb 6y ago
        Yeah, exactly. I have no problem paying income taxes in the state I earn money in. I would have a problem having a precedent that I would need to file income taxes from the five different states my clients live in. But that doesn't sound like the case here, I wouldn't be an employee which seems to be the entirety of this cash grab's justification.
      - fennecfoxen 6y ago
        Besides “less regulation” Delaware corps are easier to run because the state has great government services and courts for these things. Companies incorporate there because it’s a de facto standard. There are many qualified lawyers specializing in Delaware corporate law. The rules are predictable. The filings and the forms are well understood and administration tasks can be completed in a straightforward manner.
  - neltnerb 6y ago
    Yeah, personally I just registered my LLC in Massachusetts since it was simpler. So I don't have to deal with that but I'm familiar with it from other startups I've done.
- snuxoll 6y ago
  > Based on this reading if I take my MA incorporated LLC and move to another state I'm still supposed to pay a chunk of income tax to MA? Works that way everywhere. I’ve done planning on how to move my LLC used for odd jobs without having to get a new EIN just in case.
  - neltnerb 6y ago
    At least in MA, if I have no physical presence and made no revenue here I wouldn't have to register as a foreign corporation. I know that for sure. I hope it's similar for other states... Wasn't there a big deal about amazon avoiding even paying sales tax when shipping goods to a state that they didn't have a physical presence in? I have been assuming that providing a service to a client in another state while in MA would just be taxed in MA, the IRS certainly knows all about it but I don't know what business the other state would have given that I have no physical presence there.
    - jcranmer 6y ago
      South Dakota v Wayfair (2018) overturned the principle that you needed a physical nexus to levy sales tax.
      - neltnerb 6y ago
        I guess I'm assuming design services aren't taxable anywhere else either since it's not a physical good but yeah, maybe should look closer just in case. It's never even crossed my mind to be honest.
lsllc 6y ago
If you live in NH and work in MA, MA taxes you as if you were a resident. I think if you are under a fairly small number of days, you are exempt (e.g. you WFH permanently in NH and occasionally go to the office in MA for a meeting). More than that and you become a part year resident so your MA tax liability is pro-rated by days_in_ma/365. Anything over I think 180 days and you're just considered a resident and pay 100% (which will be most NH people with MA jobs). With so many MA employee-but-NH-residents WFH since March, they will now qualify either as a part-year resident and pay the much smaller pro-rated amount under the part year residency rule, or if under the min-days nothing at all. Predictably MA wants its tax $ and is now going after NH residents who it thinks would normally be working in MA even though they have been out of state. Of course these NH residents don't get access to any of the services in MA, except for the roads they drive on to get to work (they likely buy their gas and Dunkin' Donuts in NH).
- TuringNYC 6y ago
  This sounds like a problem of the employer not having updated payroll systems to reflect the new address of the WFH worker.
  - lsllc 6y ago
    These folks already live in NH so have a NH address for payroll. The employee would likely have to ask HR to stop MA tax withholding from paychecks (and could file the Form-1 NR/PY to get a refund at the end of the year). Although I suppose not many people would have predicted back in March what was going to happen (at least to the point of changing their tax withholdings for the year).
- beezle 6y ago
  I think you mean they tax you as a non-resident who is earning income in MA. My understanding is it all comes down to whether or not there is a 'nexus' and that can get some what complicated and states vary considerably as to what constitutes one for tax purposes.
acomjean 6y ago
That is an interesting question. I lived in NY and Worked in NJ. I had to pay taxes in Both. NY and CT have had legal interactions about this. I think CT residents working in New York City don't pay NYC taxes but must pay state taxes. https://www.hodgsonruss.com/blogs-Noonans-Notes-Blog,the-connecticut-vs-new-york-convenience-rule https://www.hodgsonruss.com/blogs-Noonans-Notes-Blog,the-con... If your working for a MA firm and they're paying your salaray and benefits, and there is no office in NH, do you effectively become a contract employee? Do you need a state to work in?
- deleted 6y ago
  [deleted]

neltnerb 6y ago

Superficially, it sure seems unjustifiable and I live in MA. I sure hope it's not allowed, I wouldn't want to have to pay income tax for every state in which I have a client that I earn money from. "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. In practice, this meant a worker who commuted four days a week but worked from home one day a week could reduce their taxable income by 20 percent." So MA knew what was justifiable, and is now not doing it. Based on this reading if I take my MA incorporated LLC and move to another state I'm still supposed to pay a chunk of income tax to MA? I guess for me it's easy enough to reincorporate in a new state or country, but it's clearly ridiculous to try to grab taxes out of what I'm already paying the place I actually live and the state I actually do work from.

lsllc 6y ago
That's always been the way. If you register your LLC in Delaware or Nevada and live in MA, you still have to register it as a "foreign corporation" and pay the annual fees (which is approx the same as just having an MA registered LLC). And since you're "earning" in MA, yeah you'll have to pay MA taxes on that. And if you have a co-founder in a different state, chances are they'll have to do the same in that state.
- Hello71 6y ago
  but do you have to pay Delaware or Nevada taxes?
  - lsllc 6y ago
    I don't think so, I've heard the adage "taxes are paid where the money is made" (and Nevada has no income tax). I think the reason for a Delaware or Nevada LLC is on the registration fees, the organization aspect; the governance of the LLC -- it's easier to run, less regulation. Typically there's no way out of the taxes, because if your home state has taxes, they'll find a way to make you pay.
    - neltnerb 6y ago
      Yeah, exactly. I have no problem paying income taxes in the state I earn money in. I would have a problem having a precedent that I would need to file income taxes from the five different states my clients live in. But that doesn't sound like the case here, I wouldn't be an employee which seems to be the entirety of this cash grab's justification.
    - fennecfoxen 6y ago
      Besides “less regulation” Delaware corps are easier to run because the state has great government services and courts for these things. Companies incorporate there because it’s a de facto standard. There are many qualified lawyers specializing in Delaware corporate law. The rules are predictable. The filings and the forms are well understood and administration tasks can be completed in a straightforward manner.
- neltnerb 6y ago
  Yeah, personally I just registered my LLC in Massachusetts since it was simpler. So I don't have to deal with that but I'm familiar with it from other startups I've done.
snuxoll 6y ago
> Based on this reading if I take my MA incorporated LLC and move to another state I'm still supposed to pay a chunk of income tax to MA? Works that way everywhere. I’ve done planning on how to move my LLC used for odd jobs without having to get a new EIN just in case.
- neltnerb 6y ago
  At least in MA, if I have no physical presence and made no revenue here I wouldn't have to register as a foreign corporation. I know that for sure. I hope it's similar for other states... Wasn't there a big deal about amazon avoiding even paying sales tax when shipping goods to a state that they didn't have a physical presence in? I have been assuming that providing a service to a client in another state while in MA would just be taxed in MA, the IRS certainly knows all about it but I don't know what business the other state would have given that I have no physical presence there.
  - jcranmer 6y ago
    South Dakota v Wayfair (2018) overturned the principle that you needed a physical nexus to levy sales tax.
    - neltnerb 6y ago
      I guess I'm assuming design services aren't taxable anywhere else either since it's not a physical good but yeah, maybe should look closer just in case. It's never even crossed my mind to be honest.

lsllc 6y ago

If you live in NH and work in MA, MA taxes you as if you were a resident. I think if you are under a fairly small number of days, you are exempt (e.g. you WFH permanently in NH and occasionally go to the office in MA for a meeting). More than that and you become a part year resident so your MA tax liability is pro-rated by days_in_ma/365. Anything over I think 180 days and you're just considered a resident and pay 100% (which will be most NH people with MA jobs). With so many MA employee-but-NH-residents WFH since March, they will now qualify either as a part-year resident and pay the much smaller pro-rated amount under the part year residency rule, or if under the min-days nothing at all. Predictably MA wants its tax $ and is now going after NH residents who it thinks would normally be working in MA even though they have been out of state. Of course these NH residents don't get access to any of the services in MA, except for the roads they drive on to get to work (they likely buy their gas and Dunkin' Donuts in NH).

TuringNYC 6y ago
This sounds like a problem of the employer not having updated payroll systems to reflect the new address of the WFH worker.
- lsllc 6y ago
  These folks already live in NH so have a NH address for payroll. The employee would likely have to ask HR to stop MA tax withholding from paychecks (and could file the Form-1 NR/PY to get a refund at the end of the year). Although I suppose not many people would have predicted back in March what was going to happen (at least to the point of changing their tax withholdings for the year).
beezle 6y ago
I think you mean they tax you as a non-resident who is earning income in MA. My understanding is it all comes down to whether or not there is a 'nexus' and that can get some what complicated and states vary considerably as to what constitutes one for tax purposes.

acomjean 6y ago

That is an interesting question. I lived in NY and Worked in NJ. I had to pay taxes in Both. NY and CT have had legal interactions about this. I think CT residents working in New York City don't pay NYC taxes but must pay state taxes. https://www.hodgsonruss.com/blogs-Noonans-Notes-Blog,the-connecticut-vs-new-york-convenience-rule https://www.hodgsonruss.com/blogs-Noonans-Notes-Blog,the-con... If your working for a MA firm and they're paying your salaray and benefits, and there is no office in NH, do you effectively become a contract employee? Do you need a state to work in?

deleted 6y ago
[deleted]