Self employed submitting taxes in California?

[uschles]

Hi all,

I'm self employed and do consulting work from my home in NJ. One of my clients is based in California. I've never traveled there to meet them, everything has been done remotely. It's a fairly small project.

Initially I thought that because I'm self employed and never went there in person to meet this client, this income is considered NJ income and I don't need to pay taxes in California. However, after doing a bit more research (mainly using some of the AI chatbots), it seems I *may* (those chatbots couldn't agree) need to because of California's "Market-Based Sourcing" sourcing rule. My consulting work for the California based client is definitely for their benefit. Does this mean I need to submit taxes in California as well?

Many thanks!

[MelindaS1 · Accepted solution]

Market-based sourcing means that yes, the customer location determines whether you have CA-source income. The filing requirement depends on the amount of your state-source income, and if you've met the minimum for the year. You will use these tables to determine if you earned enough CA-source income, that you now have a filing requirement in the state of California:

If your CA-source income is below the minimum for your filing status (single, married filing joint, surviving spouse) then you would not need to file a state tax return for California.

Learn more: California Franchise Tax Board - Part year and nonresident: Do I need to file?

[uschles]

Thank you for the quick response. It looks like my project income is less than what is required, so I will not file California taxes. Many thanks!