@ch-bhattacharya wrote:
Foreign source income taxed abroad. Double taxation treaty.
Generally speaking, if you are a US citizen or resident alien with a green card, you are required to file a US tax return reporting all your world-wide income and paying tax on it. If you also pay foreign tax on the same income, you get a credit on your US return, but you still have to file the US return.
Likewise, generally speaking, if you are a resident of New Jersey, you are required to file a NJ tax return and pay NJ income tax on all your world-wide income. That's to pay for all the benefits you get from living in New Jersey (roads, schools, infrastructure, etc.)
If you have a tax treaty, you will generally still file a federal return and you claim the treaty exemption on your return. New Jersey does NOT honor tax treaties and you will still have to file a New Jersey tax return and pay New Jersey income tax.
I did find a lawyer blog who claims that the tax treaty is supposed to apply even in states that claim it doesn't apply. Of course, the lawyer wants clients. If you are going to refuse to pay NJ taxes, I suggest you obtain professional legal and tax advice.
https://www.irs.gov/individuals/international-taxpayers/tax-treaties
https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z
