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Level 1

How do I determine if my income is California source income? I was paid to be on a TV show from a company based in California, but I was never in CA. I filmed in MA.

I was paid via 1099.
5 Replies
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Level 17

How do I determine if my income is California source income? I was paid to be on a TV show from a company based in California, but I was never in CA. I filmed in MA.

CA-source income is income from work actually (physically) performed in CA.  If you never actually worked in CA, that income is not CA-source income.

EDIT: Due to a September 2019 court decision, the income of non-resident sole proprietors providing services to CA businesses is now taxable by CA, even if the sole proprietor never worked in CA.

 

https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley...

Level 4

How do I determine if my income is California source income? I was paid to be on a TV show from a company based in California, but I was never in CA. I filmed in MA.

OK, I need to say something to everyone...  DO NOT put trust in ANY advice you see on this Intuit/Turbo Tax discussion board regarding your specific tax situation.   The last thing you want to do is to use a statement/comment being made by a non-tax expert to determine what you should do.  Especially if you are facing a difficult tax situation, seek out an expert to guide you.  My wife received a letter from the California FTB that indicated, even though she was a resident of Michigan for the full year, she owed California tax on her income since most of her clients are located in CA.  Specifically, my wife operates a home-based medical transcription business in Michigan.  She never steps foot in California.  However, per CA tax law, since she provides a service to CA-based businesses, it is deemed CA sourced income.  Because of that, my wife has to file a CA (non-resident) tax return as well as pay income tax to CA.  Does the situation suck?  Yes, absolutely it does!  But when the California FTB sent my wife a letter informing that she owed taxes, we initially did not believe it could be valid.  So we challenged it.  After talking to two tax experts who researched the situation heavily, ultimately learned that my wife did indeed owe CA tax on the income that she makes from individuals/businesses who are in CA.  The only good news in this scenario is that my wife does not need to pay Michigan tax on that same income - but it sucks nonetheless to have to file two state income tax submissions and pay income tax to two different states (with CA tax rates being much higher than MI, of course) even though all my wife's work is being done in Michigan.

Level 17

How do I determine if my income is California source income? I was paid to be on a TV show from a company based in California, but I was never in CA. I filmed in MA.

@MisterD   The fact that a non-resident independent contractor who provides services to CA businesses must pay CA taxes on that income is a very recent development, and is due to two court decisions made this year (2019) - the most recent of which was a month ago.  Thus it's very possible that you may run across older answers on this board that were correct at the time, but are correct no longer.   You can read the details of those court decisions here:  https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley...

 

Second, since she is a MI resident, her CA income also must be included on her MI tax return (as well as on a CA non-resident return) - but she'll be able to take a credit on her MI return for the taxes paid to CA, so her CA income in effect won't be double-taxed.  MI can tax its residents on all their income, regardless of where it was earned.

 

Finally, your statement that no one should put trust in any advice on this discussion board is unfair.  Many of the volunteer users on this board have years of experience answering tax questions, and the advice they give is both accurate and excellent.

Level 9

How do I determine if my income is California source income? I was paid to be on a TV show from a company based in California, but I was never in CA. I filmed in MA.

Why do people not understand that court cases do not make laws? California has had this law for many years (at least 2014). That service income earned from clients in CA is taxable in California. The court cases are just from someone challenging that law (and it sounds like they lost).

 

Here is an article from 2014 about market based sourcing:

http://www.marcumllp.com/insights-news/state-tax-update-the-shift-from-cost-of-performance-to-market...

Level 20

How do I determine if my income is California source income? I was paid to be on a TV show from a company based in California, but I was never in CA. I filmed in MA.


@ZTaxPro wrote:

Why do people not understand that court cases do not make laws?


My guess would be because of court cases like Roe v. Wade and Obergefell v. Hodges.