More on State Taxes

Many of you have sent questions about state taxes. I have chosen a few of those questions to help guide you through the 50-dimension state tax maze.

Keep in mind that there is no uniform state tax code. That means that 50 states have 50 different sets of rules.

Some states have an income tax. Some do not.

Some have a sales tax. Some have a gross receipts tax. Some have neither.

In addition to state regulations there are county and municipality tax requirements.

Indian reservation land has a whole different set of rules.

As an indie, you are responsible for finding out what you must do and when you must do it. I will give you what is generally done in interstate situations, but you must check with your individual state tax office to be sure that you are following the rules correctly.

A good place to start is the small business administration in your area. Here’s a link with local contact info http://www.sba.gov/. Then call or go to the site of your state or local tax authorities


Donna
Capitan, New Mexico
Writer/editor
Starting first year home biz as a full time RV'er in NM. What do I have to do in NM to get my RV based writing biz started after moving my base camp from Texas. I have never lived in a state with an income tax.

Donna, your task is simple. Because of state gross receipts tax you need to register for a CRS number. Call 505.827.0700. You may also need to pay state estimated taxes, similar to the way you pay federal estimated taxes. See my posts on taxes -- estimated .


Joanne
Farmington, New Mexico
Clinical counselor for special education children on a reservation
I do not charge taxes, and the entity that pays me does not pay state taxes. My question is do I pay gross receipt taxes since I am not able to charge taxes?

Get info from the tax office of the Indian reservation where you provide your services and contact New Mexico tax – 505.827-700 -- to confirm the info that you received at the Indian tax office. Confirmation is important. People give the wrong info all the time!!


Jordan
Albuquerque NM
Marketing consultant
All of my clients are out of state. All of my invoicing for my services is to out of state clients; I have no clients here in NM. I work on the online marketing and websites of independent hotels around the country (but not in NM). I've tried to wade through the explanations of whether or not I have to pay Gross Receipts Tax, but it is still not clear to me. I don't want to dodge taxes that I legitimately owe, but as a small business with limited income I'd rather not have to pay taxes that I don't owe. Can you shed some light?

Gross Receipts Tax is charged by you and then paid by you to the state.

Gross Receipts Tax is charged on sales and services that you provide to clients in NM. If you do not leave the state to service clients or the clients do not come into NM to see you then you do not charge them gross receipts tax.


For the next four questioners, I’ll provide a general answer.

Mike
Milton, NH
Computer consultant
I live in NH and have the opportunity to do independent work for companies in other states. Here in NH I pay no income tax but as a self employed I do pay a business profit tax. The question is, what about the work I provide to clients in other states? I do most of my work from my home in NH. Am I safe or do I have to start doing taxes for every state that I work in?

Chris
Don’t know where from
Independent contractor; doesn’t say what kind of work
I have earned just a little over $100 from an Illinois-based company. I reside in a state that doesn't collect state income tax. I have never been a resident of the other nor have I have been to the other state. Would such a small amount of income paid by the Illinois-based company be enough to create a tax liability that I would have to file that state's nonresident income taxes?

Robyn
New York City
I assume she is not an indie
I live in New York City and work in New Jersey. I am required to travel for work quite often, usually around 65 days per year. I was told by a number of individuals in a similar situation that when filing the New Jersey Non-Resident New Jersey tax form, I should report and pay taxes on only the amount earned when physically working in New Jersey. Is this true?

Marianna
Albuquerque, NM
My husband has a contract position teaching computer classes for a company based in Virginia. The job requires him to travel to various states. None of the classes he taught last year were in either New Mexico, where we live, nor Virginia where the company is based. The company issued him a 1099 for last year with the state listed as Virginia, although no taxes were withheld. Do we have to file Virginia state income taxes? Please tell me we don't have to file state income taxes for each state he taught in (Washington, California, Texas, Massachusetts).


Here’s the general rule for Mike, Chris, Robyn and Marianna:

If you are physically present and perform work in a state in which you do not reside, you must file a nonresident tax return for that state and pay tax on the income earned in that state. If you work in more than one state you will have to file a return and pay tax to more than one nonresident state.

In the state in which you do reside, the state tax is calculated on your entire income. But most states give you a credit for taxes paid to the nonresident state(s) so that you do not pay tax twice. For instance, Connecticut residents do not get a credit for taxes paid to nonresident states. New York and New Jersey do give credit.

Take a look at this New York Times piece Telecommuters Cry ‘Ouch’ to the Tax Gods by David S. Joachim. It’s written for employees not indies but the state-tax morass is the same for all telecommuters.