Dividing Income between California and Maine

[GrandOldDuke]

Maine resident here. Self-employed. Earned income "in" California. The CA state form indicates, "Enter your total income or loss from all business you conducted in California while you were a nonresident." How do I determine my "California Amount"? Is this my gross income from CA sources, a percentage of my federal adjusted gross income (federal AGI), or something else?

If it is a percentage of my federal AGI, would I calculate the "California Amount" by doing the following calculation? (Gross CA income) / (Gross all income) x (federal AGI)

[Mike9241]

rules are complicated. so please explain how as a nonresident you earned income in Ca

[GrandOldDuke]

Good question - it all comes down to a 2019 court ruling:

"The California Office of Tax Appeals in the Matter of the Appeal of Blair S. Bindley, OTA Case No. 18032402 ruled that an Arizona individual who had a contract for screenwriting services for two California LLCs had California source income on which he had to pay tax, even though all services were performed in Arizona."

"Because Bindley has precedential effect, it can be cited as authority by the state to broaden its tax reach. Those who provide services to customers within California from out of state may land in the crosshairs of California tax authorities even if they don’t live or perform services within California."

More on the case here and here.

[TomD8]

Your "California amount" is your net dollar income (or loss) from services you as an independent contractor provided to clients located in CA.

[GrandOldDuke]

Thanks TomD8. How do I determine my "net dollar income"? If it is net, what portion of my overall/total costs do I deduct from my gross dollar income?

[TomD8]

You said you were self-employed so I assume you file a Schedule C with your federal return.  Your net self-employed income (or loss) is the amount on Line 31 of your Schedule C.  Your "California amount" would be the portion of line 31 due to services you rendered to clients based in California.

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

[GrandOldDuke]

Thanks for the clarification TomD8. Hopefully one last question:

I found Line 31 of my Schedule C, my net self-employed income. Now, if I want to determine the "California amount" portion of that net amount, would I do the following calculation?

(Net Self-Employed Income) x (Gross CA income / Gross All Income)

Or, to ask in another way - do I attribute my gross business expenses in proportion to where the gross income came from?

[TomD8]

Yes, I think your calculation is fair and your assumption about expenses is valid.