Non-Resident, Remote Work, Self-Employeed

[Jester]

My wife and I live in NC.  She is a graphic designer and secured a purchase order for some remote work for a company located in CA.  She has never been to CA and works remotely from our home in NC.  She is not an employee of the company and the company only sends her work if there is a need.

We pay quarterly taxes for her to the state of NC.

The question is.... Do we need to pay CA state taxes?  Also, if so do we need to pay quarterly taxes to CA in the year 2020 (which we didn't do for 2019).

Thanks.

[DoninGA]

Since she does not live or work in California and as a self-employed individual there are no state taxes withheld from her income, there is no reason to file a nonresident California state income tax return.

[Critter]

Due to recent CA tax law changes, if she gets a 1099-misc from a CA Business then that is considered CA income and CA expects a return to be filed. 

[DoninGA]

@Critter Seriously??  That sounds like something CA would do.  Something like the NY telecommuter tax.  Do you have source/link?  Thanks much...

[Jester]

@CritterSo if we paid NC quarterly taxes do we get those back?  Is there a penalty for not paying quarterly taxes in 2019 to CA?  Is this new change for the 2019 tax year?

[Jester]

So from what I am reading, the new tax law is called California Assembly Bill 5

Which can be found here --> https://www.cjr.org/united_states_project/california-assembly-bill-5.php

Within the article it states : "The passage of Assembly Bill 5 offers some relief: freelance writers, editors, photographers and editorial cartoonists were given a partial carve-out, allowing publishers to hire them for up to 35 separate “content submissions” in a given year. (The law exempts more than 20 professions, including doctor, lawyer, manicurist, travel agent and commercial fisherman. Graphic designers have a full exemption, which means California judges could find themselves ruling on how much Photoshop work it takes to distinguish photography from graphic design.)"

It looks like graphic design is except and we would *not* need to file a CA state tax return?

Thanks for all the help.  Super confusing.  

[TomD8]

@DoninGA  It's called the Bindley decision.  You can read the details here: https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley...

@Jester  The decision you referenced applies to CA residents, not to non-residents.  Two different things.

[DoninGA]

Thanks Tom!

[TomD8]

@DoninGA   There have already been a couple questions on the forum from users who've been dinged by the Bindley decision.

[Critter]

I have seen a few as well and they are going back 3-4 years for the back taxes.

[txorpayer]

3-4 years, really?  Can you elaborate on some actual instances you've seen - any details?  Thanks.