I’ve seen plenty of business bros playing tax man make this claim online, but what they’re failing to understand is the principle of economic nexus.
Basically, the idea is you’re not taxed based on where you’re organized, but where you’re actually making the money.
If I have an LLC in Oregon but am living in California, that income I made is going to be subject to California taxes, not Oregon taxes.
Here’s another example - in California, every corporation that’s organized OR doing business in California must pay the $800 Franchise Tax fee.
Some states require you to pay taxes on all income earned, regardless of the source (you will get a credit in your home state if you pay taxes on that income in another state), while other states have a reciprocity agreement and don't require you to claim income in both states.
There are also situations as a W-2 employee where you can be taxed in the state where your employer is located even if you work remotely in a different state.
The key here to keeping compliant and making sure you’re remitting taxes to the correct authorities mainly circles back to understanding how the specific state you are located in taxes income.
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