Did I earn income in another state? (Answered YES because of owning a business)

[Mikewithaquestion]

There is a question that seems new to me this year. The one about earning income outside my home state because I own a business. I said YES and then it asked me to select where the income was from and it provides dropdowns for US states (except for all the states that don't have income tax).

Any income I made was from ad revenue or t-shirt sales from sites like Redbubble. There's no way to tell where that income came from in terms of a location. The way the screen is constructed, if I don't select a state, the assumption is it came from one of those no-tax states.

Should I have answered YES or NO, and how do I handle the "location" part?

[ErnieS0]

It depends. State rules vary. If you are selling products in multiple states, you probably do not have income from that state unless you make significant sales to that state.

As a result of the U.S. Supreme Court decision South Dakota Department of Revenue versus Wayfair, Inc. most states have minimum income and transaction levels before you are considered to have taxable income in that state.

The Sales Tax Institute has a nice chart showing levels when you have established a taxable state presence. See Economic Nexus State by State Chart.

[Mikewithaquestion]

Very interesting. So since my business is only a few years old and my sales are WAY WAY less than the smallest amount on the webpage (lowest I saw was $10,000 and my total for the year is probably less than a couple hundred $ in sales) It doesn't appear I'd have to report/file in any state other than my own (which is a tax free state anyway.) 

I wonder then would it make more sense to not answer the TurboTax question as a yes? Or answer it as a yes and then basically put no data in the answer spaces. Since I don't know where the sales were made it would be hard to enter any useful data.

[PatriciaV · Accepted solution]

You should receive sales reports from Redbubble that include where the items were purchased/delivered. This might be useful if you are popular in a State that would require you to file a state return. 

But if you choose to report only in your home state, then answer the question as "No, I have no income from another state."

[Mikewithaquestion]

Thanks, I do see a listing of sales and states or countries on Redbubble where purchasers were from. Adding up 2022, it looks like the total sales price of everything I sold was about $88 so I'm thinking that's too low to report for any of the locations (based on the table from @ErnieS0 in the earlier reply to my question.)

I guess I'll see what questions TurboTax asks in guiding me and take it from there.

[ErnieS0 · Accepted solution]

Most likely $88, less the cost of what you sold, means you have not established a presence in any state so report your profit to your home state.

[Mikewithaquestion]

So to do that it looks like I'd answer the question about "earning income outside my home state because I own a business" as No.

Thank you @ErnieS0 @PatriciaV