Sales tax regulations vary by state.

Hello June -

Robert from Sir Roberts Furniture Restoration,Repair and Design, Stow Ohio.

I am on your e-mail monthly list and appreciate all the information you provide.

My question, I restore antique pcs. build and repair furniture. What is the rule on charging sales tax and or reporting sales tax. Why for the question. I network with several upholsters in when they provide services they do not charge me sales tax on the work they complete. What is the rule for charging sales tax when completing work to a customer. Thanks for your time.


Dear Robert,

Happy to know my information is helpful to you. Thanks.

Every state has unique sales tax regulations. Some states have no sales tax. Others have a gross receipts tax. In New Mexico the rate changes depending on where you live.

Some charge for out-of-state purchases. Some do not.

Get the idea. No state is the same. You need to contact your state, county, city. And make sure you do. Since all the governments are hurting for money many are enforcing payment regulations with a vengeance. Be careful.

BTW -- the same applies to licensing and zoning laws.

-- June

Work/Live In More Than One State

Hello,

I am a 26 year old male just moved to California from NYC to live with my girlfriend.

I am not on the lease and I am technically a NY state resident. I have started freelancing here in Santa Monica and was wondering if I can put the CA address on the w9 or must I put the NY address since I am not on the lease in CA.

If I put the NY address, must I pay state taxes in NY or CA for this gig if the company is located in CA?

This is quite confusing and I need to find a solution ASAP!

Thanks so much!
Francis


Dear Francis,

This is not as confusing as you think.

Either:
-- You lived and worked in NY.
-- Now you live and work in California.
-- In which case you are a part-year resident in each state.

Or:
-- You lived and worked in NY.
-- You are now in California, working in California, but have not moved all your stuff to California because you are testing the waters of living with your girlfriend.
-- In which case you are a NY resident with earnings in CA as a non-resident.

So:
-- Put your mailing address on your W-9.
-- You do not have to have your name on the lease. Your girlfriend may even pay all the rent.
-- If you have moved to CA then you no longer have a place in NY except perhaps a friend's place where you crash if need be.
-- Do not attempt a two-state indie tax return on your own. Hire a pro.

Here are other posts on multi-states taxes -- state / nonresident state .

Best,
June

State tax info needed? Contact your state tax department.

Hello June,

I am getting mixed messages and wanted to get your thoughts as well. I am a virtual assistant in ABQ. I am starting to get clients outside of NM. Do I charge them ABQ gross receipts tax?

Thank you for your help.
Sandy


Hi Sandy,

Other than advice on state taxes in general I do not give specific state tax guidance. 50 states. 50 mean different sets of state tax regs. You, and anyone needing state tax advice should contact your state directly.

You're in luck. Today I had to call NM about a client's gross receipts tax. The # is 505.827.0951.

Best,
June

Working and Traveling in More Than One State

June --

IT Consultant. I started work on 1099 in Oct 2008 on a 6 month contract in CA.

As a 1099 I am subject to self employment tax for Social Security and Medicare. Does CA have any additional self employment taxes to be paid?

If I travel to CA from TX on Sunday evening around 6pm and reach at 10pm, can I claim the full per diem amount for lodging and meals for that day or can I claim the per diem amount only on the days I work in CA?

Thank you
Bill
Dallas, TX


Dear Bill,

California has no self-employment tax. You may be subject to CA income tax. Read my posts here taxes -- state / nonresident state (6)

Travel meal expenses are explained in my posts here expenses -- travel (17) and here expenses -- meals and entertainment (12) and here .

-- June

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.

New Mexico Gross Receipts Tax

Hi.

I'm writing for state specific advice. I've been a freelance part-time alternative builder, sometimes handyman for years. I've been out of the tax system for years also, but now I'm going to reenter. That's not the question though.

My residence is here New Mexico and I did a few small jobs this fall. I have already e-filed my federal (only SE tax due), and was starting to do the same for state when I saw, to my horror, that New Mexico appears to charge a "Gross receipts tax" Gross is the word ! It's a tax on all services (not just goods), it appears.

My question is this: Do micro biz independents really have to pay this too? No exemptions that I'm missing? I earned $4000 last year and it appears that even though I'm at half the poverty level, I have to pay 7.25% on every dollar I charged, BEFORE my expenses. I'm shocked. I'm already paying the 15% SE tax. That brings up my second question: Do you know how the state determines one's presence here? I travel a lot (mostly recreation) and one could say I'm here more or less, depending on what's best... do they have a way of checking?

Thanks, Steve
New Mexico


Hi Steve,

New Mexico Gross Receipts Tax -- NMGRT -- is a bit like sales tax and it gets paid to the state of New Mexico only once on a service or product.

Think of it this way: If you fix my window you charge me NMGRT on your fee for labor. You send that tax to NM.

If you purchase a new window to install for me then you would charge me tax on both the window and your labor. However, when you bought the window, were you legit, you would give the window seller a certificate to show that his selling you the window was not the final sale because you were then going to sell it to me so you would not have to pay NMGRT on that purchase.

And, yes, you do have to pay the tax. If you intentionally don't pay it it's fraud. How will they find you? Well, what if that window repair you did for me was for my office and I wrote off the expense on my tax return? And then I was audited. Besides, you drive on the roads that that tax helps to maintain.

My friend, Shirley George Frazier, has a good blog post on state sales tax in general. Check it out here.

Cheers!
June

Self-employed in more than one state

June --

I have 14 yrs as a contract electrical engineer (electronic hardware designs).

You touched upon this topic at June's Blog but you didn't get into the detail I'm curious about. I am self employed and live in CT. For the first time, I might take a client company in the neighboring state (MA). For my previous long term client located here in CT, I worked from my home office and visited their facility (3 hrs round trip) maybe about 15 days out of a year.

If I work in a similar manner for a company out of state, what criteria should be used to determine how I report income to each state. Would I only report MA income for the days I traveled to MA, and the rest is CT income? Of course, the full income from this client would be reported on their 1099 showing they're an MA company, possibly without a CT facility.

Also, while hired under contract by a local office here in CT, I had to go to their corporate office in another state to work for a few weeks. I reported all income as CT income that year. Was that reasonable?

Brian
Windham, CT



Hello Brian,

All your net self-employed income -- and all your other income as well -- is taxable to the state in which you live. That's your "resident" state. In your case, Connecticut.

Here's how it works ... or here's what the non-resident states want you to do:
If you work in other states -- that means actually work there not just go there to pick up the work -- then you are working in a non-resident state. You must pay tax to the non-resident state on the income made in that state. If you pay income tax to the non-resident state you will get a credit on your resident state tax return for the tax paid to the non-resident state.

If your income can easily be identified as done in one state rather than the other, then allocate by actual income. Or, figure your income in each state by # of days worked to # of days worked in the non-resident state.

Here's an example:
As an engineer you grossed $100,000 self-employed income. $80,000 earned in resident state, CT; $20,000 was earned in non-resident state, MA.

You had $40,000 expenses which left you a net income of $60,000.

Since 20% of your gross income was from MA, then 20% of your net $12,000 is taxable to MA.

If your expenses were such that they could be easily identifiable to each state then your portioning of income would be actual rather than as a percent.

Best, June

Where & How to Get State Info on Indies

June --

I am from Summerville, SC. I've been a handyman for 7yrs.

My question is: I do work for 2 local companies. They are independent and have workers compensation insurance. I do just about anything for them. I have never had workers compensation insurance because it costs so much. They are now saying that I need to have WC insurance myself because their wc carrier says so.

Where do I find out the 'law' of SC so that I don't spend money that might not be needed.

Shannon


Dear Shannon,

Every state differs on it workers compensation regulations. Every state differs on a lot of regulations affecting indies. There are many routes to getting information.

Contact your local what used to be called the Department of Labor. Read my post Homeland Security or Jobs 'n' Things which was about the NC Department of Labor and you'll see what I mean about the title of the agency.

If nobody there can help call your local Small Business Development Center -- often located at a community college, or your local chapter of SCORE.

I googled "South Carolina Workers Compensation " and came up with South Carolina Where Business Connects . There are many sources there.

Hope this points you and other indies in the right direction.

-- June

Taxes when you work in one state but live in another.

June --

I have been a mechanical designer for one year. I have been working in Texas for the past 8 months. Texas has no state income tax. My residence of record is in Roswell, NM, but I have been renting an apartment here (in Texas).

I have not had any New Mexico income tax withheld from earnings here. Will I still have to pay New Mexico state income taxes ?

David


Hello David,

Yes, you must pay New Mexico.

Regardless of where you work you must always pay income tax to the state where you live. Of course if your resident state has no income tax, then you pay no income tax where you live.

Typically, you pay income tax to the state where you work and you receive a credit for those taxes paid in the state where you live.

Here's an example of how it works:
You work in state A. Let's call it your work state --non-resident state in tax jargon.
You live in State B. Let's call it your home state -- resident state in tax jargon.
Your total home state income tax is $5,000. That includes tax on your earned income and tax on interest and dividends and stock sales. You paid $4,000 tax to your work state and so you get a credit. So your home state tax is $1,000.

It may not work out dollar for dollar if one state has a different tax rate than the other. And of course, if your work state, like Texas, has no income tax, then you get no credit and so owe NM the entire tax.

Also read this blog post Work in Another State

Best,
June

Work in Another State

June --

Just came across you site. My husband is going to Arizona to subcontract for a Wisconsin company. We live in Texas. Presumably, we have to pay all we earn on this 1099 as AZ state Taxes. New to this travelling thing!

Diane from Spicewood, TX



Hello Diane,

State income tax is paid to the state where the work is done. That's the nonresident state. A nonresident state tax return must be prepared. [Of course, this is not the case for states that do not have an income tax, such as Texas and Florida.]

If the state where you live -- the resident state -- has an income tax, then you must file a resident state tax return. On your resident return you will receive a credit for taxes paid to the nonresident state.

In your case, you'll need to pay and file for Arizona, not Texas.

Best,
June