CA & other states non-resident tax

[Robert Jones]

Our corporation did work in California last year and our
client withheld taxes from our bill. That is understandable.
However, they only withheld $230 and it appears from what I
am seeing in the California tax documents that they have a
minimum franchise/income tax of $800 for corporations. Does
anyone know if that is the case? Do we owe an additional
$570?

Do any other states have this kind of non-resident tax?

I have also seen messages from others about the California
"jock tax". If I, as an employee of a non-California
corporation, go to California for a convention where my
company makes no money but I get paid by my company for
being there, do I owe PERSONAL income tax to California? Do
I owe personal income tax to California if I spend 2 or 3
days in that state on a project and my company DOES receive
income from the project?

We also sell software via phone and Internet to all states
in the U.S. I know that we are SUPPOSED to collect sales tax
and remit it to all states outside our own, but that is a
virtual impossibility, given the gigantic number of taxing
authorities in each state. Is there a practical way to
accomplish this, or do we just notify each customer that
they are responsible for paying "use tax" or whatever it is
to their own taxing authority?

We are a small business and if we had to pay $500 minimum
tax to each state that we do business in, or ship software
to, we would be out of business overnight.

Thanks,
Robert

 

[David Woods, EA, ChFC, CLU]

Our corporation did work in California last year and our
client withheld taxes from our bill. That is understandable.
However, they only withheld $230 and it appears from what I
am seeing in the California tax documents that they have a
minimum franchise/income tax of $800 for corporations. Does
anyone know if that is the case? Do we owe an additional
$570?

Do any other states have this kind of non-resident tax?

I have also seen messages from others about the California
"jock tax". If I, as an employee of a non-California
corporation, go to California for a convention where my
company makes no money but I get paid by my company for
being there, do I owe PERSONAL income tax to California? Do
I owe personal income tax to California if I spend 2 or 3
days in that state on a project and my company DOES receive
income from the project?

We also sell software via phone and Internet to all states
in the U.S. I know that we are SUPPOSED to collect sales tax
and remit it to all states outside our own, but that is a
virtual impossibility, given the gigantic number of taxing
authorities in each state. Is there a practical way to
accomplish this, or do we just notify each customer that
they are responsible for paying "use tax" or whatever it is
to their own taxing authority?

We are a small business and if we had to pay $500 minimum
tax to each state that we do business in, or ship software
to, we would be out of business overnight.

You have a corporation operating in several states, and you
don't have an accountant you can go to that will answer
these questions? What is wrong with this picture. By the
way, the answer is yes your corporation will pay tax in
every state it operates in, and you will pay tax on the
share of your income earned in each state and no it is no
something a lay person is generally able to calculate on
their own.

 

[Phoebe Roberts, EA]

We also sell software via phone and Internet to all states
in the U.S. I know that we are SUPPOSED to collect sales tax
and remit it to all states outside our own

Only those states where you have nexus. I suspect Katie J.
will chime in with a detailed explanation of nexus, so I
won't.

Phoebe

 

[Katie]

Our corporation did work in California last year and our
client withheld taxes from our bill. That is understandable.
However, they only withheld $230 and it appears from what I
am seeing in the California tax documents that they have a
minimum franchise/income tax of $800 for corporations. Does
anyone know if that is the case? Do we owe an additional
$570?

Yes. California imposes a minimum tax of $800 on
corporations (S or C), LLCs, LLPs, and limited partnerships
that do business in California.

Do any other states have this kind of non-resident tax?

It is not a nonresident tax. Your corporation is not a
nonresident. It did business in California and therefore is
a California taxpayer.

A number of states have fixed dollar minimum taxes.
California's is about the highest, though.

I have also seen messages from others about the California
"jock tax". If I, as an employee of a non-California
corporation, go to California for a convention where my
company makes no money but I get paid by my company for
being there, do I owe PERSONAL income tax to California? Do
I owe personal income tax to California if I spend 2 or 3
days in that state on a project and my company DOES receive
income from the project?

If you receive compensation from your employer for services
that you perform in California, you are subject to
California personal income tax on those earnings. It does
not matter whether the activity in which you were engaged
was a money-making activity for your employer.

We also sell software via phone and Internet to all states
in the U.S. I know that we are SUPPOSED to collect sales tax
and remit it to all states outside our own, but that is a
virtual impossibility, given the gigantic number of taxing
authorities in each state. Is there a practical way to
accomplish this, or do we just notify each customer that
they are responsible for paying "use tax" or whatever it is
to their own taxing authority?

Your business is not required to collect or pay over sales
or use taxes to any state where it does not have a physical
presence (employees, inventory, etc.).

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

 

[Robert Jones]

You have a corporation operating in several states, and you
don't have an accountant you can go to that will answer
these questions? What is wrong with this picture. By the
way, the answer is yes your corporation will pay tax in
every state it operates in, and you will pay tax on the
share of your income earned in each state and no it is no
something a lay person is generally able to calculate on
their own.

Actually, I DO have a CPA who does our IRS tax forms each
year, but he has never mentioned the need to do other
states' taxes and has CERTAINLY never mentioned that we
might owe PERSONAL tax in those states. That is why I am
asking here.

As a matter of clarification, we do not have offices in
other states, we may just go to another state for 1-5 days
to meet with clients and perform inspections.

As a practical matter, with regard to collecting sales tax
for other states, how can I identify the appropriate sales
tax RATE for each community, and then how can I determine
who to send the tax that I collect TO? There must be
thousands of taxing entities around the country.

Thank you for your response. In case you are wondering, I'm
not stupid, just naive. That is why I am coming here.

Bob

 

[DORFMONT]

I have never heard of California trying to tax the attendees
at a technical or other professional conference held in the
state. I have been involved in a couple of IIE international
conferences in Los Angeles and San Francisco. Many of the
IE's from around the country know I have a tax practice and
would have asked me about this. The atttendees are here for
continuing education. Some of them may pay their own way to
come. While I may joke that the FTB is taking names and
numbers when the Superbowl champs announce "I'm going to
Disneyland". I doubt they have any interest in the hundreds
of conventions and other educational meeting held here. They
bring in revenue in other ways.

On the other hand I have never reported the portion of my
salary paid to me while I was attending an IIE conference in
any other state to that state's department of revenue.

Linda Dorfmont E.A., CFP, CSA
Fellow, Institute of Industrial Engineers

 

[D. Stussy]

I have never heard of California trying to tax the attendees
at a technical or other professional conference held in the
state. I have been involved in a couple of IIE international
conferences in Los Angeles and San Francisco. Many of the
IE's from around the country know I have a tax practice and
would have asked me about this. The atttendees are here for
continuing education. Some of them may pay their own way to
come. While I may joke that the FTB is taking names and
numbers when the Superbowl champs announce "I'm going to
Disneyland". I doubt they have any interest in the hundreds
of conventions and other educational meeting held here. They
bring in revenue in other ways.

On the other hand I have never reported the portion of my
salary paid to me while I was attending an IIE conference in
any other state to that state's department of revenue.

However, if you were a paid speaker at such a conference,
California would have been after you yesterday!