Q. What if the non resident state - the state where the school is, has no state income tax, but the resident state does? Does the student need to file an instate tax return and take a beating on the amount due?
A. Yes.
You report all your income on your resident state return, including the income earned in the other state. Your home state calculates tax on all your income, but gives you a credit, or partial credit, for tax you paid to the other state.
When you worked in a state without an income tax (e.g. Texas or Florida), there will be no credit, since there was no TX or FL tax. In other words, having worked in a state without an income tax does not get you out of paying state tax on that income, to your home state.
