8 ms·

I was fully aware that being an employer means filing all employer-related paperwork, withholding, unemployment insurance, and dealing with various employment-r

by ccleve 4y ago

I was fully aware that being an employer means filing all employer-related paperwork, withholding, unemployment insurance, and dealing with various employment-related regulations, and I did that. I was not aware that hiring a remote employee there required that my business file an income tax return, which is completely unrelated to employment. My income is none of California's damn business if I don't sell anything there and have no other nexus with the state. Plus, no other state has California's absurd franchise fee, even for small businesses with zero revenue.

RC_ITR 4y ago
I mean you seem to have this idea that your business is “you” but your business is “you and your employees”. 50% of your business (and to be frank probably 80%+ of the value add based on your write up) was done in California but you act like it’s crazy for California to make the above claim.
otterley 4y ago
Also your conclusion (“don’t hire remote workers in CA”) doesn’t necessarily follow from your specific situation. If you had 9 existing employees outside California, then hired your 10th from California, you wouldn’t have had this issue and you’d be focusing on your business instead of ranting on a blog post.
zenlikethat 4y ago
> My income is none of California's damn business Literally your income is California’s business. You are doing business in California. How are they supposed to know you’re not selling anything there… if you don’t report it?
- AdrianB1 4y ago
  How can China know you are not selling anything there is you don't report it? Or Russia, North Korea and the other 250 countries on this planet? You know your computer is made in China and probably your clothes too, so you are doing business with China, do you report your income there?
cyral 4y ago
If you derive income from some states you need to file with them even if nobody from your company works there. That may be hard to enforce but that is the case for many states. I agree that it is a total pain for business owners though, it is difficult to understand the patchwork of state laws that apply or don't apply to you _and_ find the right people (accountants/lawyers) to deal with it.
TheRealPomax 4y ago
Except it did, because all revenue generated by your business was made in substantial part by using Californian resources. A resource that, had you not hired them remotely, would have contributed to the Californian economy instead. As such, California has laws in place to recoup those losses. Of course, at some point "one Californian asset" amongst many assets from other states is a drop in the bucket, so there's a threshold, and your business was well above that threshold. Is it questionable phrasing? Yes. Is it wrong? No. Your business clearly and directly derived income from California, and per California law, the state is owed income tax on that. (But is it kind of ridiculous in a modern economy? ...ehhhh it depends. California is one of the few economic powerhouses amongst the states, and there's good arguments to be made for having this system in place. You can argue about the threshold, but the idea that states should not be allowed to recoup economic loss from people being hired out of state without the employer paying back taxes over the income generated through that hire to the state that got them that hire, is not quite thinking it through)
- paulgb 4y ago
  > all revenue generated by your business was made in substantial part by using Californian resources This is technically true in the sense that zero is a substantial part of zero :)
  - TheRealPomax 4y ago
    Even if you treat yourself as employee, a business with two employees, with one of them from California, gives rise to a situation where it can be trivially argued that well over 25% of the business income can be attributed to a Californian workforce (even if the exact contribution isn't 50%, it is most certainly substantial enough to warrant a tax notice)
    - nrmitchi 4y ago
      I'm not sure if you're reading the whole thread here. > well over 25% of the business income can be attributed to a Californian workforce The argument is that the company in question had 0 total revenue. If you want to attribute 25% of that to a California source, sure, but it's still $0.
chrisseaton 4y ago
> My income is none of California's damn business If you're operating a business there employing people then yes of course it's their business. It's like this is the first time you're hearing about 'the government'.
tablespoon 4y ago
> My income is none of California's damn business if I don't sell anything there and have no other nexus with the state. Is that what the law actually says, as stated by someone with some expertise about your situation (including the cross-jurisdiction aspects)? Because you don't really get to be your own judge an jury. I perceive civil business law to be a big pile of known and unknown unknowns (to me), and I certainly wouldn't trust my interpretations of it for anything important.
paulcole 4y ago
> I was not aware that hiring a remote employee there required that my business file an income tax return, which is completely unrelated to employment. My income is none of California's damn business if I don't sell anything there and have no other nexus with the state. Your business is generating revenue from a resource of California (their resident). You better believe they’re going to want a piece of that.
kxyvr 4y ago
Honestly, this is pretty normal, if aggravating. When I moved to TX, a registration for an out of state LLC was $750. The registration system required a credit card up front to levy a $1 charge for every name search on a web forum to ensure the business name didn't conflict with an existing entity. Though, they will refund those fees if registration occurs. After registration, I spoke with the comptroller and they told me to register for sales tax and that would be the only tax paid. A year later, I received an angry letter from the secretary of state that I owed gross receipts tax and their estimated payment was over $1000. After some investigation, I discovered that this tax was only levied on revenue of over $1 million and TX knew precisely what I had made because of the sales tax filings and they significantly under that amount. Further, it's unclear to me why there are two different departments levying taxes in TX and why the first wouldn't give a heads up about the second. Additional filings made the problem go away. The point is not that this situation is the exact same as yours. The point is that each state has bizarre, unintuitive tax and employment law. Even if you ask, you'll likely get incorrect information from the state until an angry letter shows up. As long as your paperwork is organized, these problems can be made to go away. This is the cost of running a business. It should be easier, but it's not. Some states are easier to work with than others. Even "business friendly" states like TX are aggravating and much more so than other states that I've done business in.

by ccleve 4y ago

RC_ITR 4y ago

I mean you seem to have this idea that your business is “you” but your business is “you and your employees”. 50% of your business (and to be frank probably 80%+ of the value add based on your write up) was done in California but you act like it’s crazy for California to make the above claim.

otterley 4y ago

Also your conclusion (“don’t hire remote workers in CA”) doesn’t necessarily follow from your specific situation. If you had 9 existing employees outside California, then hired your 10th from California, you wouldn’t have had this issue and you’d be focusing on your business instead of ranting on a blog post.

zenlikethat 4y ago

> My income is none of California's damn business Literally your income is California’s business. You are doing business in California. How are they supposed to know you’re not selling anything there… if you don’t report it?

AdrianB1 4y ago
How can China know you are not selling anything there is you don't report it? Or Russia, North Korea and the other 250 countries on this planet? You know your computer is made in China and probably your clothes too, so you are doing business with China, do you report your income there?

cyral 4y ago

If you derive income from some states you need to file with them even if nobody from your company works there. That may be hard to enforce but that is the case for many states. I agree that it is a total pain for business owners though, it is difficult to understand the patchwork of state laws that apply or don't apply to you _and_ find the right people (accountants/lawyers) to deal with it.

TheRealPomax 4y ago

Except it did, because all revenue generated by your business was made in substantial part by using Californian resources. A resource that, had you not hired them remotely, would have contributed to the Californian economy instead. As such, California has laws in place to recoup those losses. Of course, at some point "one Californian asset" amongst many assets from other states is a drop in the bucket, so there's a threshold, and your business was well above that threshold. Is it questionable phrasing? Yes. Is it wrong? No. Your business clearly and directly derived income from California, and per California law, the state is owed income tax on that. (But is it kind of ridiculous in a modern economy? ...ehhhh it depends. California is one of the few economic powerhouses amongst the states, and there's good arguments to be made for having this system in place. You can argue about the threshold, but the idea that states should not be allowed to recoup economic loss from people being hired out of state without the employer paying back taxes over the income generated through that hire to the state that got them that hire, is not quite thinking it through)

paulgb 4y ago
> all revenue generated by your business was made in substantial part by using Californian resources This is technically true in the sense that zero is a substantial part of zero :)
- TheRealPomax 4y ago
  Even if you treat yourself as employee, a business with two employees, with one of them from California, gives rise to a situation where it can be trivially argued that well over 25% of the business income can be attributed to a Californian workforce (even if the exact contribution isn't 50%, it is most certainly substantial enough to warrant a tax notice)
  - nrmitchi 4y ago
    I'm not sure if you're reading the whole thread here. > well over 25% of the business income can be attributed to a Californian workforce The argument is that the company in question had 0 total revenue. If you want to attribute 25% of that to a California source, sure, but it's still $0.

chrisseaton 4y ago

> My income is none of California's damn business If you're operating a business there employing people then yes of course it's their business. It's like this is the first time you're hearing about 'the government'.

tablespoon 4y ago

> My income is none of California's damn business if I don't sell anything there and have no other nexus with the state. Is that what the law actually says, as stated by someone with some expertise about your situation (including the cross-jurisdiction aspects)? Because you don't really get to be your own judge an jury. I perceive civil business law to be a big pile of known and unknown unknowns (to me), and I certainly wouldn't trust my interpretations of it for anything important.

paulcole 4y ago

> I was not aware that hiring a remote employee there required that my business file an income tax return, which is completely unrelated to employment. My income is none of California's damn business if I don't sell anything there and have no other nexus with the state. Your business is generating revenue from a resource of California (their resident). You better believe they’re going to want a piece of that.

kxyvr 4y ago

Honestly, this is pretty normal, if aggravating. When I moved to TX, a registration for an out of state LLC was $750. The registration system required a credit card up front to levy a $1 charge for every name search on a web forum to ensure the business name didn't conflict with an existing entity. Though, they will refund those fees if registration occurs. After registration, I spoke with the comptroller and they told me to register for sales tax and that would be the only tax paid. A year later, I received an angry letter from the secretary of state that I owed gross receipts tax and their estimated payment was over $1000. After some investigation, I discovered that this tax was only levied on revenue of over $1 million and TX knew precisely what I had made because of the sales tax filings and they significantly under that amount. Further, it's unclear to me why there are two different departments levying taxes in TX and why the first wouldn't give a heads up about the second. Additional filings made the problem go away. The point is not that this situation is the exact same as yours. The point is that each state has bizarre, unintuitive tax and employment law. Even if you ask, you'll likely get incorrect information from the state until an angry letter shows up. As long as your paperwork is organized, these problems can be made to go away. This is the cost of running a business. It should be easier, but it's not. Some states are easier to work with than others. Even "business friendly" states like TX are aggravating and much more so than other states that I've done business in.