You didn't ask a question, so I'm not sure what you are looking for, but here are some comments on your situation. You seem to know that what the company is doing is wrong. I expect that it will be hard to convince them of that.
You can solve the NC problem by making estimated tax payments to NC yourself. That way you can avoid owing a large amount at the end of the year. But you will have to file a CA nonresident tax return to try to get a refund of the CA tax that is being improperly withheld, and that will lead to having to convince the CA Franchise Tax Board (FTB) that you did not do any work in CA. They are notoriously aggressive about collecting income tax. Your W-2, with CA wages and CA tax withheld, will make it look like you worked in CA. It would help to have a letter from the company saying that you did not do any work in CA and that the CA tax was withheld in error, but it might be hard to get them to write such a letter. It would be better if you could get them to correct the error now by refunding to you the CA tax that was withheld, and not showing any CA wages or CA tax on your W-2.
Actually, when you work in different states you are supposed to pay tax to each state that you work in, on the income that you earn in that state. NC will give you credit on your NC resident tax return for part or all of the tax that you pay to other states. Doing this correctly is obviously complicated, and requires keeping track of how many days you work in each state. Your employer should be doing that, and should show the wages and tax withheld for each state on your W-2. There are tax professionals who specialize in handling multi-state taxation.
The general rule is that all of your income is subject to tax by the state that you live in, no matter where the income is from. Any income that you earn for working in another state is also subject to tax by the state that you worked in. The state that you live in will give you credit for part or all of the tax that you pay to other states. There are several exceptions to this general rule, but I don't think any of the exceptions would apply to a NC resident.
If you have a specific question, post a reply in this thread. Please do not post multiple questions about the same issue.
