4 ms·

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

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

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.