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I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

Do I need to pay any state taxes?
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6 Replies

I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

Re servicing your clients who reside in California, you might want to read the material at the following web site (link below - start on page 30).

 

https://www.caltax.com/wp-content/uploads/2018/03/NonresidentsONLINE.pdf

I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

Thanks for sending along the link.  I found something else on Turbo Tax, and I believe based on my situation (I have an SMLLC and it is consulting work that I perform out of my own home in FL, this may be applicable)?

 

If you perform consulting work remotely from your home state, this income is sourced where the work is performed (your home state) and not where the company is located. In this instance, you will not have "earned income in another state" (so select "no" to this question (see screenshots) and will only need to report this income on your state of residence income tax return.

Hal_Al
Level 15

I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

Although that is the general rule (If you perform consulting work remotely from your home state, this income is sourced where the work is performed (your home state) and not where the company is located), California is an exception. 

 

 

To my knowledge, "the only exception to that is California.  Due to a 2019 court ruling in CA, if you are a sole proprietor and you provide services to a client located in CA, that income is taxable by CA - even if you never set foot in California.

I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

I agree with @Hal_Al and it should be noted that there are other states, I believe, that have adopted the same market-based approach as California. 

 

Professional guidance is recommended for businesses whose clients reside in those states.

TomD8
Level 15

I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

@Hal_Al @tagteam --

 

Does Bindley apply if the SMLLC has elected to be treated as a corporation?  (I don't know the answer.)

https://ota.ca.gov/wp-content/uploads/sites/54/2019/08/18032402_Bindley_Decision_OTA_053019.pdf

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

I have moved my SMLLC to Florida and now reside in FL (and moved from CA). My clients are in IL and CA. I work out of my home in FL and work remotely. Where to file?

@TomD8

 

I sort of skimmed through the decision, but found the following passage interesting.

 

In addition, Regulation section 25120(b) provides, in pertinent part, that “[i]n general, the
activities of the taxpayer will be considered a single business if there is evidence to indicate that
the segments under consideration are integrated with, dependent upon or contribute to each other
and the operations of the taxpayer as a whole.” In short, while these authorities were established
in the context of corporations, the essence of what constitutes a unitary business—i.e.,
sufficiently interrelated and dependent in-state and out-of-state business activities that render it
appropriate for the income and losses to be combined and taxed as one unit—is equally
applicable to sole proprietorships.

 

 

Quite frankly, I find the entire market-based sourcing concept of state income taxation disturbing (being adopted more frequently applying the Wayfair decision to income tax) and nothing more than a modality for increasing a state's income tax revenue from taxpayers that have no contact with the state other than a client who happens to reside there (substantial overreaching and what if the client is only a part-time resident of the state?).

 

See https://www.americanbar.org/groups/taxation/publications/abataxtimes_home/17aug/17aug-pp-lipin-etal-...

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