How to file state income tax for a single member LLC in a state out of my resident state?

[zehua888]

I plan to form a Montana LLC with a Montana address as my LLC's business address. I hired a mail forwarding service in Montana so I can set my business address there. I will operate the business remotely in WA state. I am a full time employee in WA state.

I understand that LLC taxes are pass through to me, so after I file the federal tax that includes my salary income in WA and LLC income in Montana, how do I file the Montana state income tax? Can I file a nonresident return only for the LLC income and not for my salary earned in WA state?

[DS30 · Accepted solution]

Since you are working remotely in WA and you have a single member LLC even though the LLC was formed in MT, you will not have a MT state income tax return related to your MT formed LLC unless you derive some of your LLC's income from MT. This is due to the fact that the MT department of Revenue follows the same guidelines as the federal government when it comes to treating a single member LLC as a disregarded entity for income tax filing purposes.

Please note that Montana requires LLCs to file an annual report between January 1 and April 15 but no MT state income tax return need to be filed in MT in all income for the LLC comes from sources outside MT.

[zehua888]

Thank you! I don't know if I should consider my income as derived from MT, so please allow me to explain about my business a bit. I am going to help clients buy bitcoins. They will wire the money to my business checking account, and I will charge a small processing fee, and wire the funds to CoinBase, which is a bitcoin exchange. Then i will buy bitcoins for them and send it to their account.
Should I consider this small processing fee as derived from MT? My clients will not be MT residents. But my LLC's business address is a MT address and when I open the business checking account from the bank, I'll be using that address.

With that said, even if I do need to file a MT state income state, I'd only be filing a nonresident income tax ONLY for the income of the LLC right? My salary earned in WA state will not be subject to state income tax in MT, is that right?

[DS30]

Since all your business activities occur while you are working remotely in WA, then this would all be considered WA sourced income. If you do eventually have MT sourced income (from doing business while actually being in MT), since you are a resident of WA, you would only have to include MT-sourced income on your MT nonresident state income tax return. No part of your WA salary earned in WA would need to be included on your MT nonresident state income tax return.

[zehua888]

Got it. Thank you DeeS! My business address is a MT mail forwarding service address. Can MT argue that the income is MT sourced merely based on that business address fact?

[DS30]

This is a legal questions but just because the business address is in one state does mean the income is sourced to that state. Income is sourced where the work is performed to earn the income. So if the income is earned in WA, then it will be WA sourced income.