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> You will pay taxes anywhere your business has an economic nexus. For almost all of you, this will be "where you do the work that earns the money." Importantly, this is not not not not not where your customers are [...] This seems to be a common belief among entrepreneurs, but all the evidence I have found (and my accountant) point to it not being true, at least not in all states. For example, here is a page from California's FTB web site: https://www.ftb.ca.gov/businesses/Sales_Factor.shtml > Jill, a nonresident of California, owns a web design business that she holds as a sole proprietorship. She works from her home out of state but has customers in various states including California. For the 2013 taxable year, Jill's sales receipts from California customers are $300,000 out of the total sales receipts everywhere of $1,000,000. Does Jill have a filing requirement in California? > Yes, nonresident individuals are taxed on all California source income. Jill's sole proprietorship is carrying on a business in and out of California and will be required to apportion its income to California using UDITPA rules. Under market assignment, sales of services are assigned to California if the purchaser of the service received the benefit of the service in California. Accordingly, $300,000 will be assigned to the California sales factor numerator for Jill's sole proprietorship and Jill would apportion 30% ($300,000 CA sales/$1,000,000 total sales) of its business income from her sole proprietorship to California. I would love it if you had some evidence you could share that the popular view (you only pay taxes where you do the work) is correct so that I could stop paying taxes in California :) |
http://www.uniformlaws.org/Act.aspx?title=Division%20of%20In...