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N.H. Announces It Will Sue Massachusetts over Cross-Border Income Tax Collection (nhpr.org)
106 points by iaw 4 days ago | hide | past | favorite | 136 comments





Interesting, I’m not quite certain how a state has the authority to tax residents of another state to begin with. Anyone have some case law on the subject handy?

EDIT: I’d like to add in purely talking about W-2 or 1099 income tax. There are various other arguments to be made about income from sources such as ownership in a corporation or partnership registered in a foreign state that I’ve no desire to get into, as that’s possible to work around by moving the entity.


If you work in another state then your subject to their tax jurisdiction. The issue here is you’re not actually setting foot in the other state so it’s looking more like a cash grab.

I’d bet the question is gonna hinge on whether the office location of the work has been updated in company records. If your “office” is still on the corporate books in Taxachussets then you’ll have to pay.


This is ultimately what I’m questioning though. If I work for a MA based company, how do they have any claim to a portion of my income when I have no residency status there? States aren’t allowed to tax interstate commerce, after all, and not being a resident there I would have no vote for the state houses that determine tax laws.

I live in ID and work remotely for a CA-based company, so I’ve got a personal interest in this if CA ever decided they wanted to pull a similar move.

Interested to see what the result would be if this got to the SCOTUS.


Superficially, it sure seems unjustifiable and I live in MA. I sure hope it's not allowed, I wouldn't want to have to pay income tax for every state in which I have a client that I earn money from.

"Massachusetts previously allowed out-of-state residents who worked for Massachusetts-based entities to deduct whatever portion of their income was derived while working from home. In practice, this meant a worker who commuted four days a week but worked from home one day a week could reduce their taxable income by 20 percent."

So MA knew what was justifiable, and is now not doing it.

Based on this reading if I take my MA incorporated LLC and move to another state I'm still supposed to pay a chunk of income tax to MA? I guess for me it's easy enough to reincorporate in a new state or country, but it's clearly ridiculous to try to grab taxes out of what I'm already paying the place I actually live and the state I actually do work from.


That's always been the way. If you register your LLC in Delaware or Nevada and live in MA, you still have to register it as a "foreign corporation" and pay the annual fees (which is approx the same as just having an MA registered LLC). And since you're "earning" in MA, yeah you'll have to pay MA taxes on that.

And if you have a co-founder in a different state, chances are they'll have to do the same in that state.


Yeah, personally I just registered my LLC in Massachusetts since it was simpler. So I don't have to deal with that but I'm familiar with it from other startups I've done.

but do you have to pay Delaware or Nevada taxes?

I don't think so, I've heard the adage "taxes are paid where the money is made" (and Nevada has no income tax).

I think the reason for a Delaware or Nevada LLC is on the registration fees, the organization aspect; the governance of the LLC -- it's easier to run, less regulation. Typically there's no way out of the taxes, because if your home state has taxes, they'll find a way to make you pay.


Besides “less regulation” Delaware corps are easier to run because the state has great government services and courts for these things. Companies incorporate there because it’s a de facto standard. There are many qualified lawyers specializing in Delaware corporate law. The rules are predictable. The filings and the forms are well understood and administration tasks can be completed in a straightforward manner.

Yeah, exactly. I have no problem paying income taxes in the state I earn money in. I would have a problem having a precedent that I would need to file income taxes from the five different states my clients live in.

But that doesn't sound like the case here, I wouldn't be an employee which seems to be the entirety of this cash grab's justification.


> Based on this reading if I take my MA incorporated LLC and move to another state I'm still supposed to pay a chunk of income tax to MA?

Works that way everywhere. I’ve done planning on how to move my LLC used for odd jobs without having to get a new EIN just in case.


At least in MA, if I have no physical presence and made no revenue here I wouldn't have to register as a foreign corporation. I know that for sure. I hope it's similar for other states...

Wasn't there a big deal about amazon avoiding even paying sales tax when shipping goods to a state that they didn't have a physical presence in?

I have been assuming that providing a service to a client in another state while in MA would just be taxed in MA, the IRS certainly knows all about it but I don't know what business the other state would have given that I have no physical presence there.


South Dakota v Wayfair (2018) overturned the principle that you needed a physical nexus to levy sales tax.

I guess I'm assuming design services aren't taxable anywhere else either since it's not a physical good but yeah, maybe should look closer just in case. It's never even crossed my mind to be honest.

If you live in NH and work in MA, MA taxes you as if you were a resident. I think if you are under a fairly small number of days, you are exempt (e.g. you WFH permanently in NH and occasionally go to the office in MA for a meeting). More than that and you become a part year resident so your MA tax liability is pro-rated by days_in_ma/365. Anything over I think 180 days and you're just considered a resident and pay 100% (which will be most NH people with MA jobs).

With so many MA employee-but-NH-residents WFH since March, they will now qualify either as a part-year resident and pay the much smaller pro-rated amount under the part year residency rule, or if under the min-days nothing at all.

Predictably MA wants its tax $ and is now going after NH residents who it thinks would normally be working in MA even though they have been out of state.

Of course these NH residents don't get access to any of the services in MA, except for the roads they drive on to get to work (they likely buy their gas and Dunkin' Donuts in NH).


I think you mean they tax you as a non-resident who is earning income in MA.

My understanding is it all comes down to whether or not there is a 'nexus' and that can get some what complicated and states vary considerably as to what constitutes one for tax purposes.


This sounds like a problem of the employer not having updated payroll systems to reflect the new address of the WFH worker.

These folks already live in NH so have a NH address for payroll.

The employee would likely have to ask HR to stop MA tax withholding from paychecks (and could file the Form-1 NR/PY to get a refund at the end of the year).

Although I suppose not many people would have predicted back in March what was going to happen (at least to the point of changing their tax withholdings for the year).


That is an interesting question.

I lived in NY and Worked in NJ. I had to pay taxes in Both.

NY and CT have had legal interactions about this. I think CT residents working in New York City don't pay NYC taxes but must pay state taxes.

https://www.hodgsonruss.com/blogs-Noonans-Notes-Blog,the-con...

If your working for a MA firm and they're paying your salaray and benefits, and there is no office in NH, do you effectively become a contract employee? Do you need a state to work in?


Why does it matter where you (physically) step foot? I think WFH has proven that crossing the physical of land barriers is no longer required to do much of anything.

If a Google employee ostensibly works in “the NYC office” but hasn’t set foot in the office in over >6 months (will be like 15 months by the time Google’s asking people to be back in July), lives in another state (e.g. New Jersey, maybe the employee took advantage of the remote work conditions to Florida or Texas)…how long should New York be able to tax this person despite the fact that they don’t live or work in New York? Google’s also not headquartered in New York. Google could move everyone in the computer to e.g. the Seattle or the Austin office (but are currently refusing to do so) if we’re all working remotely anyway.

As long as he works for NY office he will pay NY taxes. He would need to ask Google to switch his office's location.

I assume Google would have to switch his official status which it may not want to do for various reasons. If I lived in NH (which I don't) and wanted to switch my location from an MA office to remote, the company would have to do paperwork to do so.

Also, they might change their current health benefits as those are often priced & administered according specific geographic regions. Maybe not a big deal between MA/NH but certainly if you switched to remote only from a little farther afield.

The health benefits already have to be set up to account for where the employees actually live rather than where we work on paper. E.g. if an employee lives in New Jersey and commutes into New York, either the health insurance has to cover providers in New Jersey or the employee has to see doctors in New York. It doesn’t solve anything to change an entry in a database and pretend the employee is actually somewhere else.

Because taxes allegedly pay for the government to do things. If you're not setting foot in the state you're not using the infrastructure and services.

I guess arguably the state is also creating the conditions for your job to exist (with infrastructure and services that you aren't paying for), but I sure hope that's not a convincing argument enough for income taxes.

That's about as literally what corporate taxes should be going to as it gets.


If a company in one state wants to employ a remote worker in another state, don't they need to set up a token corporation in that other state for the purposes of that employee's taxes? What marginal value is that state providing in order for that employee to work remotely?

This actually is a big issue. If you have an employee in a particular state, as a company you are now considered to have a presence in that state and would now be required to pay sales tax on sales to customers in that state (I think this used to be only sales people, but now is any employee).

There are a decent number of companies that will let employees work from no-sales-tax states (FL, TX, NV, NH etc) without question, but for other states, if they do much business there but don't already have a "presence" there, then they'll have to start paying sales tax to that state on any business they do there.


This is not true as of this court decision:

https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.

Sales tax needs to be paid regardless of presence.


Wow, that's interesting thank you! I guess that opens things up for remote workers if there's now no "penalty" to go to a state where your company previously had no presence.

Nope, just need to register as a foreign entity.

That can get pricey, in MA it's $500 a year to register as a foreign entity. Then you need registered agents in each state which could be your employee there but maybe you don't want them to do that.

I think you are right about employees. There needs to be some ID associated with state withholdings.

I think you are wrong if they are contractors. You just need to send the IRS the 1099 since there is no withholding done on money paid that way. The person receiving it plus the 1099 I send the IRS is enough for the IRS to confirm the income.


I live in ID and work remotely for a CA-based company. I get paid from the same EIN that people working in the CA office do. Yes, they had to file as a foreign entity and that also means a registered agent in the state, but they also have to pay into Idaho’s unemployment insurance for my wages as well which costs them more than that.

Makes sense. You're an employee. If you were a contractor they wouldn't have to do that stuff and you'd get taxed at a weird rate and have to report it yourself. But you'd have to actually be a contractor for that, if you're truly an employee then it is what it is.

So it sounds like the workaround is that said MA company has to start a NH foreign entity, which I assume is all but free, and have that foreign entity pay the employees. That way they're "working remote" for a NH entity and sidestep all this nonsense.

But it's fair to say... why bother, just go back to using the rules you clearly understood to be fair which you were using earlier this year.


Allegedly. And yet very few tax or government funding systems even attempt to measure usage to determine individuals' tax burden (there are some exceptions, like toll roads). Public schools are obviously paid for by everyone regardless of parenthood. The argument is that education is important to society and that everyone benefits from having an educated population, and yet the amount of funding and the amount of taxes varies wildly from district to district despite students being free to move anywhere they please after they finish their public education.

By that logic, why should MA limit itself to taxing employees of MA businesses. Surely there's plenty of revenue potential in people who have never been anywhere near MA.

Well, that’s kind of my point, except I think a more reasonable direction would be for a state to only take income taxes from someone according to some estimate of how much the state’s actions are responsible for that income, and when the income is from out of state, that estimate should probably be close to zero.

Matt Levine likes to reference a Monty Python bit and say that the optimal tax (politically speaking) is one on foreigners living abroad.

Hence why states ratcheted up hotel taxes to double and triple sales tax rates. Even states with “no” sales tax go out of their way to charge 15%+ on hotel stays.

Legal jurisdictions are still driven by geography. Without either physical presence or legal residence in MA, the government of MA has no authority to demand anything from someone in NH.

MA could charge an MA-based employer a payroll tax for out of state employees, but has no jurisdiction to charge the employees an income tax. A further legal theory is that it it would step on the federal constitutional power to regulate interstate commerce.


'Where you set foot' is actually the most important thing, or else we'd all be paying zero taxes in some state while 'not setting foot there'.

The most obvious artifact of 'where you set foot' is where you have your residence, and for taxation 'how long you're there per year' actually matters.

So if you spend > 1/2 of your waking life in Zone A, but sleep in Zone B ... well, it might make a little bit of sense to have some kind of tax regulation there, or not.

Because you get most services like water, roads, garbage, 'healthcare' where you 'reside' it's probably just easier to make it all about residence and that's that. But again, 'residence' is where you 'set foot the most'.


Because when you walk into some other State’s backyard they have the right to demand a toll.

Somewhat related, if you’re on the books as working out of their backyard, they will again demand a toll.


Because the constitution doesn’t allow states to tax interstate commerce.

Because you drive on that state’s roads, are protected by its police, etc.

These people are not, though, if they're working from home. (I expect that'd be the argument they would make.)

I don't have any case law and am not a lawyer, but if you live in one state and work in another, the state you work in can absolutely tax you. As I understand it, there's some truing up between the states, but in this case it's pretty simple. Even if you live in no income tax NH, if you work in relatively high tax MA, you pay MA taxes.

The issue here is the people no longer work in Massachusetts. They may not even be setting foot in Massachusetts. My situation is that I used to work in Google’s NYC office but live in New Jersey (and have lived here since pre-COVID) and have set foot in New York maybe like six times since March, never for any work-related purpose, yet New York is still withholding income taxes.

"yet New York is still withholding income taxes"

That is google. They don't have to withhold that. IF google didn't withhold that state tax -- it would be impossible for NY to figure out how much it is owed. You can ask google to not withhold for NY with a HR meeting.


The withholding is based on Google’s understanding of the law (it’s not like they could just decide to not do it). I can’t ask Google to change their interpretation of the law since I’m not a lawyer.

Sure. And people I know are moving officially remote to NH and will not be going into an MA office except rarely so they will/should no longer be on the hook for MA income taxes.

It often revolves around whether the company has a physical place for you to work. Just because you are not using it may not alter the tax situation.

New York has a rule about “convenience of the employer.” The name is misleading and doesn’t make any sense, but basically if there was no way to do the work in New York (e.g. your company sent you to New Jersey to hook up someone’s internet), it’s not considered New York-sourced income, but otherwise it is.

The issue with the current situation is that in principle I could be doing the work in New York (it doesn’t matter where I do it), but the office is closed and I don’t live in New York. So I have strong reasons for not doing my work in New York, but in principle I could be doing it there.

I guess there’s a further clause that you have to spend at least one day out of the year in New York to be taxed there, which unfortunately I have done (despite no longer traveling there for any work-related purpose).


Can't Google switch your status to remote? Or won't they? I think that's how things work where I am. (It doesn't really matter in my case as I live in the same state as my officially assigned office where I set foot in maybe a half dozen times in the past year.)

They could, but they won’t. I think one reason is that management is trying to maximally maintain the pretense that we’re all going to return to the office in July (I don’t see how we can make everyone go back after ~15 months without losing a bunch of employees) to keep their options open. Another is that I think Google doesn’t want to pick a fight with a state government we have thousands of employees in, or get bad press for looking like we’re trying to get out of paying taxes; in both cases, it’s better for the company for employees to take independent action (e.g. asking New York for the money back when we file our returns and making the state government deal with us all individually if it really wants to play this game).

Good luck though I suspect it will be challenging to the degree that your employer says that you are working out of a given office to claim otherwise.

When California came after me for Hawaii income, all I had to do was send them a copy of my Hawaii returns. Someone who lives in NJ will file taxes there anyway.

My concern is that I will file the New Jersey return and pay taxes on the money I earned while working and living there, and file the New York return and ask for my money back since I don’t live or work there, and if New York denies the refund, I’ll be paying taxes in both states.

It’s unclear at this point whether New Jersey will let New York claim all this taxable income or whether New Jersey will try to claim it for itself (it needs the money too). The tax rates are pretty similar in both states but my preference would be for the money to go to the state I actually live in.


You need to pay NY taxes, you worked for NY office. If you don't want to pay NY taxes then ask Google to change your office location to NJ.

And NY will demand their taxes 100%.


Worked, past tense. I’m perfectly happy paying New York taxes on the income I earned while actually working out of the New York office.

Yes, that totally makes sense. I had to wait quite a while for that California refund to arrive... It seems there would be enough people in your situation that your state might do something official on your behalf? The attorney general could certainly file suit for the amount that NY state owes NJ's citizens.

It is public information though that the US offices are closed and we don’t have to be back until July (it’s called “voluntary WFH” but they won’t even let us back in to pick up stuff we left on our desks).

I assume that so long as you're officially working out of an office in a location and the company won't change your payroll status, that's where you're working out of as far as taxing authorities are concerned no matter what the "public information" is. I'm guessing it's not even especially legit but very few entities are pushing on it at this point--except in cases like this one where there's a big advantage to employees pushing to switch their work location.

Taxation isn't primarily by residency but rather by income source, and sourcing rules make it very easy to have income attributed places other than where you live. (I was taxed by both California and Illinois in 2019 despite continuous residence in Tokyo, due to being physically present in each jurisdiction for N days and working during some portion of them, with N in the ~20ish region.)

The United States claims global taxation over its subjects. It's a similar concept.

While I consider this bullshit, they claim that authority based on your status as a US Citizen. Your state of domicile has similar claims to income made from out-of-state sources.

Yes, but they give deductions/credits for foreign taxes paid. There is also an income exclusion for the first $107,000 of earned income. So what MA is doing is much worse in that respect.

It's better in the sense that they aren't going after the employees' non-MA-related income, like real estate or investment income, but they would have no grounds to do that because these people are not MA residents.


Okay, sure, but these people are NH residents taxed by MA. MA is claiming taxation over people who aren't its subjects…

Also immoral and wrong.

I’d argue the global taxation at the Federal level is more justified. You’re paying for the right to flee back from anywhere on Earth and have the doors of the USA swing open for you.

Citizens of every other country in the world are also able to flee back to their home country without having to pay tax in a place they don't live.

As I recall, the tax is set so that it only affects people getting a relatively hefty amount of income and there's a credit on taxes paid outside the country.

But yeah, it's complex and it sucks and everything I know about it came from reading patio11's posts on it.


There's a Foreign Earned Income Exemption which will eliminate the tax payment requirement for most people on wage income, but you'll be taxed on investments/interest from the first dollar. People with income higher than the FEIE who pay taxes to a high-tax high-service jurisdiction (like Japan) will generally use the foreign tax credit to take care of most of their liability; folks who live in a low-personal-income jurisdiction like Hong Kong and are high-paid get smacked pretty hard.

There exists a plethora of compliance problems which are worse than the actual taxation, for example the PFIC regulations which make it non-economic to do standard middle class investment abroad for e.g. a child's education. Advocates for Americans overseas are trying to get the PFIC and FATCA regulations overturned or get safe harbors expanded dramatically, but there exists a feeling in Washington that the only Americans who'd have bank accounts or mutual funds outside the US are "fat cats" (get it?) trying to abuse the tax system rather than pretty typical taxpayers with pretty typical life choices.


Thanks for clarifying, I know you have a lot of first hand experience with this.

Why not just put a price on "we come rescue you" insurance from the US Gov? Certainly that's cheaper than 40% of your income?

A number of countries already offer that type of package: https://www.vanityfair.com/news/2020/07/how-carlos-ghosn-esc...

you're paying for much more than just that, realistically. It's a lot of money.

Don’t look at Maine then. They come for your spouse too.

I expect a lot of those workers will go remote to WFH from NH indefinitely. I've know a lot of people over the years who commuted from NH to MA. Over time, I've seen more and more of them move remote. And I see a ton doing it at the moment.

(MA is relatively high state income tax and NH is zero.)


If this is happening to you, fire up a slack meeting with your HR department. Explain to them you no longer want MA state taxes withheld, you will pay whatever you owe manually. Make MA tax authorities go after you in court. MA's tax authorities will have a rough time seeing this - since they need the employer's withholdings to see what is going on cross state.

> MA's tax authorities will not catch this - since they need the employer's help to catch this situation.

At least until MA learns CA FTB's techniques.


My understanding is that California sees federal filings. They knew exactly how much I had earned in another state, after I moved halfway through the year. They just wanted to be extra sure I had paid that state some income tax.

It doesn't affect me. I live in MA which is why I've never bothered doing anything officially even as I've been increasingly remote from MA offices.

5% isn't really that high unless you're comparing to zero. And, right at the border, NH property taxes are correspondingly higher.

Gotta pay for stuff somehow, it's not the federal government.


In addition, our paying for everything with property taxes creates such an unfair imbalance poorer towns went to the Supreme Court to fight for fairer school funding.

They lost of course, because we could afford better lawyers.


NH property taxes [can be] high but, even in southern NH, property prices are a fair bit lower than the immediate Boston area for the most part.

"Taxachussets" isn't really that bad these days compared to, say, California in terms of taxes. But it's still a lot higher than NH which doesn't provide the level of services that MA does in general.


Can you give some examples of the difference in services between states? In Canada we use "equalization" formulas and generally, services are pretty similar across the country (with some exceptions-- education, health)

I know from layoffs at Raytheon Woburn (a city in Massachusetts between NH and Boston), those that lived in NH got much less unemployment.

The public school systems around Boston are top notch. (A major point for employees with children). Major international airport down the highway another selling point.

NH amazon bid knocks Massachusetts (Its road/traffic, which pre pandemic was truly aweful...) but reminds Am amazon its close to our restaurants and universities. https://www.wbur.org/bostonomix/2017/10/18/new-hampshire-ama...


>The public school systems around Boston are top notch.

The public schools where the rich are are great. Boston is ringed by rich suburbs. If your not rich enough to live somewhere with good schools MA schools are middling.


Sick leave, paid parental leave, stricter environmental standards and enforcement, better minimum wage and work condition laws, etc.

If you're poor the state healthcare system you're eligible for is much more comprehensive in MA.

Back in the day, in Connecticut we used to quip about "Taxachusetts", but now Connecticut business mainstays like GE are moving north because the Massachusetts tax regime isn't so bad compared to where CT has gotten.

https://en.wikipedia.org/wiki/State_income_tax -- Mass is in the middle of the pack for total tax burden, way below places like Mississippi for example.

"Taxachussetts" is catchy, and MA is culturally liberal, so the perception sticks.


While we may be middle of the pack, we do have a lot of taxes: Income tax, sales tax, gas tax, meals tax, property tax, vehicle excise tax and "use tax" (that's where if you buy something like a TV in tax free NH, you're supposed to declare it on your MA Form-1 tax form and pay the sales tax on it).

Then you get into the astronomical MWRA water & sewer rates and then to town garbage pickup charges etc. (in addition to the property taxes). Finally if the local fire department/tax payer funded ambulance ever gives you a ride to the hospital, expect a $1500/mile charge there.

It certainly can add up!


Agreed. We're middle of the road as far as income tax goes. Start adding in things like sales tax, fees paid to government, sin taxes, etc. and the net tax burden is pretty high.

Also, local governments very much have a "wring out every cent we can" attitude. Places full of rich people who step in line tax the crap out of people. Places like New Bedford and Fitchburg know that if they charge people more than a token amount for trash they'll just be pulling it out of the river.


The link that the GP posted is suggests we're middle of the road as far as total tax burden, not income tax specifically.

We're in the top ten according to the "total revenue" graph and top 20 (or maybe we were 21 or 22, I didn't really count accurately and don't feel like going back, solidly in the top half in any case) in terms of marginal rate.

> "use tax" (that's where if you buy something like a TV in tax free NH, you're supposed to declare it on your MA Form-1 tax form and pay the sales tax on it).

That's been present in every state I've ever lived in. Illinois even had a "here's a number to fill in if you don't want to calculate it."


New York and North Carolina have that as well. I imagine all states with a sales tax probably do now (frankly it’s just a smart move on their part to avoid losing a large source of revenue to untaxed online purchases) “We estimate households with your income spend about X$ per year on out of state purchases. Enter $Y for use tax owed?”

If you're a jerk and you're ugly you're gonna get called ugly more often than if you're just ugly.

Massachusetts has a lot of stuff wrong with it governmentally and culturally (none of which have much to do with where the state falls on a left/right axis) so nobody is gonna cut it a break when it comes to taxing people.


The "higher property taxes in NH" is a myth unless you own water-front property in NH. It may well have been true a long time ago, but these days the tax rate in many MA towns particularly around Boston is higher than most NH towns.

I'm talking, like, Nashua compared to just over the border in MA. Similar cost of living areas.

Yes, Arlington or Nantucket will be higher than both.


Source? I live miles from the water and my property taxes on 400k are 12k. Is that normal?

The biggest driver is property valuation. The rates parts of NH (e.g. southern) might be higher $ per/$1K, but the valuation will be way lower -- your 4 BR cape in Arlington might be valued at $1M, but it'd be $200K in NH.

Up in Merrimack, Sullivan counties in NH, the tax rates are lower than Southern NH. Towns in MA like Lexington ($15/$1K) and Amherst ($21/1K) are ridiculous (and have high valuations).

(and no, $12K on a $400K house seems outrageous, that's like $30 per $1K)


I'm in north centralish Mass and my property taxes are about $4K on a $300K-$400K property so that seems very high.

And yet here I am. It feels like you may have been mistaken.

I had a friend who lived in NH and worked in MA. He said he kept a detailed diary down to the minute of when he was working in each state. He said it was worth the overheard because of all the MA taxes he didn't have to pay.

Good! I hope they prevail. California's legislators are talking about taxing Californians for up to 10 years after they've moved from California!

https://www.bizjournals.com/sanfrancisco/news/2020/08/18/wil...


If you get a stock grant in California, you owe California income tax on every share that vests from a block that is awarded in CA. The income tax is prorated by the number of months that you were a resident in CA, relative to the vesting point.

I left CA about a year after a stock award and had to pay CA state tax for 3 years after leaving (but each year the rate would decline).

There's a serious WTF moment when you find this out, particularly when you pick up from CA and go to WA (a state without income tax).


> Massachusetts previously allowed out-of-state residents who worked for Massachusetts-based entities to deduct whatever portion of their income was derived while working from home.

Does the same thing happen along the NV CA border, where the income tax difference is even more extreme? 0% vs top marginal rate of 12.3%? My guess is no, otherwise NV border towns would be chock full of tech workers WFH'ing from a zero income tax state.


NV residents who are 1099 employees of a CA corporation pay CA income taxes for the days which are spent on-site in CA. If that number is 0, all the better - no dealings with the FTB need to happen at all.

Having roots in NV myself, and knowing a number of friends who currently work at FAANG companies who’ve moved back, I’ve heard the typical salary cut corresponds roughly to the CA income tax they’d otherwise pay (~12%).

It isn’t similar to NH/MA, because it isn’t feasible to commute from NV geographically.


I don't think that's true. Even if the independent contractor never sets foot in California, if he is performing services for a California customer, he has an economic nexus with the state and is likely doing business in California for income tax purposes.

You're right. I meant W-2 workers, not 1099. Thanks for the correction.

> Does the same thing happen along the NV CA border

Well, the same thing happens for nonresident remote workers with CA employers: https://www.palmspringstaxandtrustlawyers.com/nonresidents-w...

> NV border towns

Aside from Stateline and Incline Village and other places around Lake Tahoe, towns on the NV side (really, either side, but the NV side is germane here) of the CA-NV border aren't exactly places that are attractive to live, and even those few aren't convenient commuting distance for the occasional office visit for the kind of WFH job where being close to the office in CA would matter, because the CA tech hubs aren't anywhere near the NV border. So, if you are going to work remotely out-of-state for a CA firm for tax advantage, you aren't especially likely to do it from an NV border town, as opposed to somewhere else in NV or an even more distant low-tax state.


Yes, NV and CA have borders but that border isn't anywhere near where most of the tech workers live. Also, CA is notoriously aggressive about chasing income from out of state residents.

Only employees physically working in CA are subject to CA taxes. Remote non CA employees are not, because source is traced to where the work is performed.

Rules are different for contactors.


Correct. Out-of-state commuters have to pay CA income tax.

If they didn't, LAS would be the busiest airport in the country.


worth noting that the 5-4 opinion was written by Justice Samuel Alito in 2015...two states cant tax double-dip on a single tax payer.

https://www.supremecourt.gov/opinions/14pdf/13-485_o7jp.pdf

I cant imagine Massachusetts winning this.


NH has no income tax so technically there's no double-dipping!

(I also don't believe MA will win)


New Hampshire has no income tax so there's no double dipping.

There is double-dipping in the sense that you shouldn’t be subject to two states’ tax regimes at the same time. The amount collected doesn’t matter.

I don't think you are subject to a tax regime if they don't tax you.

However, taxation without representation would be a bigger issue. How can MA tax someone who is a NH resident and isn't allowed to vote in MA?


The same way legal immigrants are taxed who can't vote.

I don’t know that I agree with MA in this case, but you can’t ignore the broad context. New Hampshire has, for decades, been in aggressive pursuit of revenue from MA residents.

- The shopping malls just across the border where MA residents don’t have to pay sales tax - just tolls (An employee at the Salem Apple store once divulged to me that it was the highest grossing Apple store in the world)

- The state run, tax free liquor stores just across the border that attract droves of MA residents

- The ease of procuring fireworks and weapons (the former illegal in MA, the latter far more difficult to obtain) just across nearly every border crossing

New Hampshire might to some extent have a valid point here, but it also feels like they won’t tolerate a taste of their own medicine.


I am a former NH resident. I think our collective argument would be that it is not our fault that Massachusetts decides to tax all their own businesses to an absurd degree. If you raise taxes there is a trade-off (often worthwhile) that involves business and people leaving your area.

NY already does this. It’s called the telecommuter tax.

This is a bit dated, but some states have pledged not to tax telecommuters working in different states during the pandemic, but others like NY and CA are being fairly aggressive about taxing them:

https://www.wsj.com/articles/remote-working-from-a-different...


CA especially, some months ago I remember reading about them considering a retroactive tax - you'd have to pay if you lived in the state any time within the past 10 years.

I have no idea if it was dropped, is in limbo, or may actually happen.


I would be surprised if any courts held up a retroactive tax. Perhaps it was grandstanding?

Good ! Mass needs do live within its means. I suggest government officials of the politburo giving up their enormous suburbans and government drivers.

Hot-take prediction: this will end up to be one of those situations where other rich countries with a federal system have battle-worn solutions (Germany? Switzerland?) while America wrings its collective hands and says “it could never work?!”

I can vouch for Canada.

In Canada, you pay federal income tax plus provincial income tax to the province of your residence. You also get services (e.g. healthcare) from the province of your residence.

If you live in one province but work (remotely or in-person) in another province, the company deducts taxes based on its own location. When you file taxes at the end of the year and indicate your province of residence, taxes get recalculated based on that and you either have to pay or get a refund. Taxes already deducted will automatically get transferred to the province of residence (it may be a bit different if one of the provinces is Quebec. In that case, some more manual intervention may be required. But the taxes owed are still calculated based on residence).

If you move your residence during the year, your residence as of December 31 are used for calculating taxes.


Genuine question curious to discuss with others: what is the purpose of states now anyway?

States have all the inefficiency of competing against each other for tax dollars, having to promulgate separate laws and regulations, school curricula, inefficiencies in sharing information, it goes on and on.

On the plus side (I'm trying to brainstorm) states enable (do they?) people to live in places with different ideals or laws, or standards of living? Is that true? Do people go somewhere to live because the state political/governmental structure is different from another? Does it protect or enable extremely conservative (or radical) communities that would be washed out to the average otherwise? Is it a protection against broad brush government that cannot know or correctly allocate funds and attention to small jurisdictions?

Other than to emphasize or give power to certain differences in population that were baked in long ago, what purpose do states serve? In a country where people move and work almost without boundaries? Why not delegate some of the finances / taxation / regulation functions to the federal government? Is it more effective at a local level?


The political structure of the USA is so screwed up at this point that I view leaning towards states' rights as one of the only viable pathways for the country to survive.

Having Red and Blue come together is apparently not going to happen, and it's just getting worse and worse. Maybe the opposite is the way to go. A radical shift in power towards the states gives every subculture their own laboratory to live or die in. Liberal values can be protected in liberal states, and you'd see the opposite in conservative states.

Maybe we could stop fighting for the federal right to shove our ideologies down the throats of states that don't want them. Different places would do different things, and that would be alright.


That is a conservative point of view, ironically. American progressives typically want the federal government to take even more control.

I'd jokingly counter with what's the purpose of middle managers? We can just get rid of the middle layers of the bureaucracy right?

But the pandemic should be a good example of the role state governments play. In this case with picking up the slack when the federal government is refusing to take action on a problem.




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